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China is Planning to Purge Foreign Technology and Replace With Homegrown Suppliers
By Bloomberg News Dec 18, 2014 7:13 AM GMT-0200 Photographer: Brent Lewin/Bloomberg
A laborer inspects a Huawei Technologies Co. base unit on a pole in the financial... Read More
China is aiming to purge most foreign technology from banks, the military, state-owned enterprises and key government agencies by 2020, stepping up efforts to shift to Chinese suppliers, according to people familiar with the effort.
The push comes after a test of domestic alternatives in the northeastern city of Siping that was deemed a success, said the people, who asked not to be named because the details aren’t public. Workers there replaced Microsoft Corp.’s (MSFT) Windows with a homegrown operating system called NeoKylin and swapped foreign servers for ones made by China’s Inspur Group Ltd., they said.
The plan for changes in four segments of the economy is driven by national security concerns and marks an increasingly determined move away from foreign suppliers under President Xi Jinping, the people said. The campaign could have lasting consequences for U.S. companies including Cisco Systems Inc. (CSCO), International Business Machines Corp. (IBM), Intel Corp. (INTC) and Hewlett-Packard Co.
“The shift is real,” said Charlie Dai, a Beijing-based analyst for Forrester Research Inc. “We have seen emerging cases of replacing foreign products at all layers from application, middleware down to the infrastructure software and hardware.” Photographer: Tim Rue/Bloomberg The plan for changes in four segments of the economy is driven by national security... Read More
Security Panel
China is moving to bolster its technology sector after Edward Snowden revealed widespread spying by the U.S. National Security Agency and accused the intelligence service of hacking into the computers of Tsinghua University, one of the China’s top research centers. In February, Xi called for faster development of the industry at the first meeting of his Internet security panel.
Foreign suppliers may be able to avoid replacement if they share their core technology or give China’s security inspectors access to their products, the people said. The technology may then be seen as safe and controllable, they said.
China ranks second behind the U.S. in technology spending, with outlays rising 8.1 percent to $182 billion last year, according to research firm IDC. The U.S. spent $656 billion, a 4.2 percent increase over 2012.
The push to develop local suppliers comes as Chinese regulators have pursued anti-trust probes against western companies, including Microsoft and Qualcomm Inc. (QCOM) Recent months have seen Microsoft’s China offices raided, Windows 8 banned from government computers and Apple Inc. (AAPL) iPads excluded from procurement lists. Trade War
“I see a trade war happening. This could get ugly fast, and it has,” said Ray Mota, chief executive officer of Gilbert, Arizona-based ACG Research, who expects the issue to result in direct talks between the U.S. and China. “It’s not going to be a technology discussion. It’s going to be a political discussion.”
In September, the China Banking Regulatory Commission ordered banks and finance agencies to ensure that at least 75 percent of their computer systems used safe technology by 2019. The regulator called on financial institutions to dedicate at least 5 percent of their IT budgets towards the goal.
While the CBRC policy doesn’t make a distinction between foreign and domestic products, it says banks must favor companies who share their “core knowledge and key technology.” It also cautions banks from relying too heavily on one supplier.
Chinese firms, like Huawei Technologies Co. and ZTE Corp. (000063), have already begun to gain local market share at foreign rivals’ expense.
Inspur Group’s Inspur Electronic Information Industry Co. (000977) rose as much as 2.6 percent in Shenzhen before closing 1.5 percent higher at 39.54 yuan. Beijing Orient National Communication Science & Technology Co. (300166), a provider of software products to phone companies and financial institutions, climbed 9.9 percent to the highest since its January 2011 listing. Sinodata Co. (002657), which provides technology services to the banking sector, added 9.8 percent. Military Order
About 80 percent of banks’ core servers and systems are made by foreign brands, Yan Qingmin, a CBRC vice chairman, said Nov. 27 at a conference in Beijing sponsored by the news magazine Caijing.
“Most of China’s financial IT systems are from foreign countries,” Yan said. “From the perspective of national security, it poses potential threats to us.”
The CBRC may start accounting for banks’ use of Chinese technology in its regulatory reviews, the Shanghai Securities News reported Dec. 4.
Xi’s Central Military Commission issued a similar, although less detailed, order in October, according to a report in the party-run People’s Liberation Army Daily. That document described information security as key to winning battles.
Intel, Microsoft, HP, Cisco and Qualcomm declined to comment. IBM said it isn’t aware of any Chinese government policy against using its servers in the banking industry.
Industrial & Commercial Bank of China, the country’s biggest bank, deployed a new IBM mainframe in August, the two companies said. Jilin Trials
Chinese companies have faced similar pressure overseas. A 2012 U.S. Congressional report said Huawei and ZTE, the country’s largest phone-equipment makers, provide opportunities for Chinese spies to tamper with U.S. communications networks. Huawei has since been shut out from several U.S. deals.
In May, the U.S. Department of Justice accused five men in the People’s Liberation Army of allegedly hacking into the computer systems of U.S. companies to steal information. The Chinese government called the charges “absurd.”
The orders from Chinese banking and military commissions coincided with the trial of domestic computer systems in Siping, a city of 3.4 million people in Jilin province. Other cities and agencies in Jilin will now begin testing whether NeoKylin, a Linux-based operating system from China Standard Software Co., can substitute for Windows and servers made by Inspur can replace IBM’s, the two people familiar with the plan said. The trial will then expand across the country, they said. Domestic Software
Similar efforts were confirmed by one provincial-level worker and two local government workers in Jilin’s capital of Changchun, who asked not to be named while discussing internal matters. The two local government workers said some specialized software was swapped for domestic versions, including a tax program designed by the Harbin Institute of Technology.
China faces obstacles in replacing foreign software and hardware on a national scale. Almost three decades after paramount leader Deng Xiaoping approved his State Hi-Tech Development Plan, Chinese companies hold a fraction of global market share. They’re still unable to match the most advanced products, such as high-end bank servers.
“A key government motivation is to bring China up from low-end manufacturing to the high end,” said Kitty Fok, China managing director for IDC.
National security provides China a powerful rallying cry, particularly within its sprawling state sector. China National Petroleum Corp., the country’s largest energy producer, announced Nov. 26 -- during China’s first Cybersecurity Week -- that it had replaced its Microsoft e-mail with the homegrown eYou program to improve security.
“The technology gap is closing,” said Mota, who advises Cisco and HP, as well as Huawei and ZTE. “In China, they have the patience to figure it out.”
To contact Bloomberg News staff for this story: Steven Yang in Beijing at kyang74@bloomberg.net; Keith Zhai in Beijing at qzhai4@bloomberg.net; Tim Culpan in Taipei at tculpan1@bloomberg.net
To contact the editors responsible for this story: Nicholas Wadhams at nwadhams@bloomberg.net; Michael Tighe at mtighe4@bloomberg.net Suresh Seshadri
China is Planning to Purge Foreign Technology and Replace With Homegrown Suppliers
By Bloomberg News Dec 18, 2014 7:13 AM GMT-0200 Photographer: Brent Lewin/Bloomberg
A laborer inspects a Huawei Technologies Co. base unit on a pole in the financial... Read More
China is aiming to purge most foreign technology from banks, the military, state-owned enterprises and key government agencies by 2020, stepping up efforts to shift to Chinese suppliers, according to people familiar with the effort.
The push comes after a test of domestic alternatives in the northeastern city of Siping that was deemed a success, said the people, who asked not to be named because the details aren’t public. Workers there replaced Microsoft Corp.’s (MSFT) Windows with a homegrown operating system called NeoKylin and swapped foreign servers for ones made by China’s Inspur Group Ltd., they said.
The plan for changes in four segments of the economy is driven by national security concerns and marks an increasingly determined move away from foreign suppliers under President Xi Jinping, the people said. The campaign could have lasting consequences for U.S. companies including Cisco Systems Inc. (CSCO), International Business Machines Corp. (IBM), Intel Corp. (INTC) and Hewlett-Packard Co.
“The shift is real,” said Charlie Dai, a Beijing-based analyst for Forrester Research Inc. “We have seen emerging cases of replacing foreign products at all layers from application, middleware down to the infrastructure software and hardware.” Photographer: Tim Rue/Bloomberg The plan for changes in four segments of the economy is driven by national security... Read More
Security Panel
China is moving to bolster its technology sector after Edward Snowden revealed widespread spying by the U.S. National Security Agency and accused the intelligence service of hacking into the computers of Tsinghua University, one of the China’s top research centers. In February, Xi called for faster development of the industry at the first meeting of his Internet security panel.
Foreign suppliers may be able to avoid replacement if they share their core technology or give China’s security inspectors access to their products, the people said. The technology may then be seen as safe and controllable, they said.
China ranks second behind the U.S. in technology spending, with outlays rising 8.1 percent to $182 billion last year, according to research firm IDC. The U.S. spent $656 billion, a 4.2 percent increase over 2012.
The push to develop local suppliers comes as Chinese regulators have pursued anti-trust probes against western companies, including Microsoft and Qualcomm Inc. (QCOM) Recent months have seen Microsoft’s China offices raided, Windows 8 banned from government computers and Apple Inc. (AAPL) iPads excluded from procurement lists. Trade War
“I see a trade war happening. This could get ugly fast, and it has,” said Ray Mota, chief executive officer of Gilbert, Arizona-based ACG Research, who expects the issue to result in direct talks between the U.S. and China. “It’s not going to be a technology discussion. It’s going to be a political discussion.”
In September, the China Banking Regulatory Commission ordered banks and finance agencies to ensure that at least 75 percent of their computer systems used safe technology by 2019. The regulator called on financial institutions to dedicate at least 5 percent of their IT budgets towards the goal.
While the CBRC policy doesn’t make a distinction between foreign and domestic products, it says banks must favor companies who share their “core knowledge and key technology.” It also cautions banks from relying too heavily on one supplier.
Chinese firms, like Huawei Technologies Co. and ZTE Corp. (000063), have already begun to gain local market share at foreign rivals’ expense.
Inspur Group’s Inspur Electronic Information Industry Co. (000977) rose as much as 2.6 percent in Shenzhen before closing 1.5 percent higher at 39.54 yuan. Beijing Orient National Communication Science & Technology Co. (300166), a provider of software products to phone companies and financial institutions, climbed 9.9 percent to the highest since its January 2011 listing. Sinodata Co. (002657), which provides technology services to the banking sector, added 9.8 percent. Military Order
About 80 percent of banks’ core servers and systems are made by foreign brands, Yan Qingmin, a CBRC vice chairman, said Nov. 27 at a conference in Beijing sponsored by the news magazine Caijing.
“Most of China’s financial IT systems are from foreign countries,” Yan said. “From the perspective of national security, it poses potential threats to us.”
The CBRC may start accounting for banks’ use of Chinese technology in its regulatory reviews, the Shanghai Securities News reported Dec. 4.
Xi’s Central Military Commission issued a similar, although less detailed, order in October, according to a report in the party-run People’s Liberation Army Daily. That document described information security as key to winning battles.
Intel, Microsoft, HP, Cisco and Qualcomm declined to comment. IBM said it isn’t aware of any Chinese government policy against using its servers in the banking industry.
Industrial & Commercial Bank of China, the country’s biggest bank, deployed a new IBM mainframe in August, the two companies said. Jilin Trials
Chinese companies have faced similar pressure overseas. A 2012 U.S. Congressional report said Huawei and ZTE, the country’s largest phone-equipment makers, provide opportunities for Chinese spies to tamper with U.S. communications networks. Huawei has since been shut out from several U.S. deals.
In May, the U.S. Department of Justice accused five men in the People’s Liberation Army of allegedly hacking into the computer systems of U.S. companies to steal information. The Chinese government called the charges “absurd.”
The orders from Chinese banking and military commissions coincided with the trial of domestic computer systems in Siping, a city of 3.4 million people in Jilin province. Other cities and agencies in Jilin will now begin testing whether NeoKylin, a Linux-based operating system from China Standard Software Co., can substitute for Windows and servers made by Inspur can replace IBM’s, the two people familiar with the plan said. The trial will then expand across the country, they said. Domestic Software
Similar efforts were confirmed by one provincial-level worker and two local government workers in Jilin’s capital of Changchun, who asked not to be named while discussing internal matters. The two local government workers said some specialized software was swapped for domestic versions, including a tax program designed by the Harbin Institute of Technology.
China faces obstacles in replacing foreign software and hardware on a national scale. Almost three decades after paramount leader Deng Xiaoping approved his State Hi-Tech Development Plan, Chinese companies hold a fraction of global market share. They’re still unable to match the most advanced products, such as high-end bank servers.
“A key government motivation is to bring China up from low-end manufacturing to the high end,” said Kitty Fok, China managing director for IDC.
National security provides China a powerful rallying cry, particularly within its sprawling state sector. China National Petroleum Corp., the country’s largest energy producer, announced Nov. 26 -- during China’s first Cybersecurity Week -- that it had replaced its Microsoft e-mail with the homegrown eYou program to improve security.
“The technology gap is closing,” said Mota, who advises Cisco and HP, as well as Huawei and ZTE. “In China, they have the patience to figure it out.”
To contact Bloomberg News staff for this story: Steven Yang in Beijing at kyang74@bloomberg.net; Keith Zhai in Beijing at qzhai4@bloomberg.net; Tim Culpan in Taipei at tculpan1@bloomberg.net
To contact the editors responsible for this story: Nicholas Wadhams at nwadhams@bloomberg.net; Michael Tighe at mtighe4@bloomberg.net Suresh Seshadri
UBS Group AG is flagging risks from China’s $1 trillion worth of unhedged foreign debt as forecasters see bets against the greenback unwinding in 2015.
The world’s second-largest economy is exposed to shifts in currency and interest rates as never before because of expanding international trade and easing foreign-exchange regulations, said Stephen Andrews, head of Asia banks research in Hong Kong at UBS.
Daiwa Capital Markets has a $1 trillion estimate for carry-trade inflows since 2008, bets on the difference between yields in China and overseas. It sees a 5.7 percent drop in the yuan next year...
...“This could get very uncomfortable very quickly,” he said in a Dec. 12 interview. “I boil it down to its basics. You’ve borrowed unhedged and leveraged: you’re at risk.”
Andrews says the mechanics of what’s happening are this: mainland companies deposit 20 percent to get a letter of credit from an onshore lender. They take that document to get a low-interest dollar loan from a Hong Kong bank, which treats it like a no-risk check fully backed by the guarantor.
The companies flip those dollars back to the mainland, where they use them as collateral to get even more letters of credit, leveraging even further, said Andrews. That money is then used to invest in China’s high-yield and often risky trust products or in the booming stock market. The profits are then used to pay off dollar borrowings...
...“There were too many cheap dollars in the market for everyone to borrow,” Kevin Lai, an economist at Daiwa in Hong Kong, said Dec. 16. “If you just put the money in China, the carry plus appreciation is about 5 percent, so why not, right?”
Lai estimates $1 trillion of carry-trade inflows since the first round of U.S. quantitative easing in 2008, of which $380 billion entered China disguised as commerce flows...
...Andrews says the similarities between pre-Asian financial crisis Thailand and China today are limited. The amount involved is still small relative to China’s $9.2 trillion gross domestic product. The nation’s overall loan to deposit ratio is healthy and China has foreign-exchange reserves that peaked at $4 trillion in June, he said...
...The yuan has dropped to 6.2280 a dollar as of 10:11 a.m. in Shanghai today, its first annual loss since 2009, as monetary policies in the world’s two largest economies diverge...
...While China had a trade surplus of $57.47 billion in November, export growth slowed to 4.7 percent due to a government crackdown on fake invoicing. Shipments to Hong Kong grew 1 percent, compared with surges of 24 percent and 34 percent in October and September. Currency reserves declined to $3.89 trillion at the end of the third quarter.
“For many years China offered high yields, absorbing a lot of dollar liquidity,” Daiwa’s Lai said. “Much of the supposedly healthy trade surplus is fake, just short-term speculative carry-trade inflows. When the money leaves, the impact may be huge.”...
I just found this article on Motley Fool. Top 10 reasons, it's a bubble. So what will the trigger be for the RE meltdown in Canada? I'm not asking if, just when and by what means. I feel bad for my northern friends, I saw what this did to many people in the US.
No doubt, Canada’s housing boom has reshaped the country’s economy. It doesn’t matter what your view is on real estate. The nation’s two decade long property boom has produced some truly remarkable statistics. Here’re ten jaw-dropping numbers from Canada’s real estate market.
1. $419,619: The average price of a Canadian home hit almost $420,000 in October, up by more than 7% over the same month a year ago. Today, the average house in Canada is more than 50% greater than the average price for a house in the United States.
2. 27x rent: It has never been more affordable to rent relative to owning. According to The Economist, housing prices have risen 53% faster than rents since 1975. Today, Canadian real estate is priced at 27 times annual rental income, a record high.
3. 9x income: According to numbers compiled by billionaire investor Kyle Bass, Canadians now pay nine times their median income for a new house. Historically, they paid between three and four times their median annual income.
4. $20,800 gap: A house is considered affordable if your monthly mortgage, heating costs, and property taxes account for no more than 32% of your gross household income. The annual gross income needed to afford the average house in Canada based on a five-year fixed mortgage and a 5% down payment: $89,500. The estimated median family income in 2014: $68,700. That’s a $20,800 shortfall.
5. 163%: Why have housing prices outpaced incomes? Debt. According to Statistics Canada, household liabilities rose to 163.6% of disposable income in the second quarter, approaching the record 164.1% last year. The rise has been fueled mostly by mortgage debt.
6. 49% of sales: Who’s buying all of these homes? Millennials. A stunning 49% of all sales are going to first-time buyers. In the U.S. only 29% of sales are to first-time homebuyers, down from an historic average of 40%.
7. 52% of incomes: This is worrying because younger millennials have never seen an interest rate shock. According to calculations by DBRS, debt payments would cost 52% of income for people holding mortgages insured by the government if loan rates rise by 2%. That compares to debt payments eating up 45% of incomes during the first quarter this year.
8. 27.4% of mortgages: The loan-to-value ratio is simply the mortgage amount dividend by the appraised value of the property. The higher the loan-to-value ratio, the riskier the loan. According to Morningstar, 27.4% of mortgage loans in Canada have a loan-to-value ratio above 80%, which is usually considered high-risk. In fact, the Canadian banks’ percentage of loans with loan-to-value ratios greater than 80% is now higher than for U.S. banks in 2007, just before the housing bubble burst.
9. 50% losses: This leverage could put the banking system at risk. According to Morningstar analyst Dan Werner, “In a worst-case scenario, if all of the uninsured loans were losses and residential prices fell 30%, we think nearly half of most banks’ tangible equity would be affected.” Largely domestic firms such as the Canadian Imperial Bank of Commerce and the National Bank of Canada would be the most affected.
10. 4.1% yield: Cheap money is pushing up asset prices for other real estate assets, too. Today, the yields on RioCan Real Estate Investment Trust (TSX: REI.UN) and H&R Real Estate Investment Trust (TSX: HR.UN), the nation’s two largest landlords, are nearing record lows between 4% and 5% respectively. Historically, these two firms have yielded between 7% and 8%. A real estate bust would be bad news for these two investments.
Is Canada's housing market a bubble?
We can't predict the next move in Canada's housing market. However, the numbers suggest that things are starting to look bubbly (and the fallout could be ugly).
And a very well reasoned presentation by Hilliard McBeth. He mentions the tulip bubble as having no trigger other than everyone waking up one day and realizing it's a massive bubble. As a side note, I know of no Americans who can be this pleasant while telling an entire country, you're screwed.
And a very well reasoned presentation by Hilliard McBeth. He mentions the tulip bubble as having no trigger other than everyone waking up one day and realizing it's a massive bubble. As a side note, I know of no Americans who can be this pleasant while telling an entire country, you're screwed.
Ten Reasons Why There Can't Be a Housing Bust in Canada:
1. The Bank of Canada says there's no housing bubble, ergo nothing to bust.
2. CMHC still has room on its balance sheet for more 100% taxpayer backed high-ratio mortgages - nothing to worry about up here.
3. There's still One Billion Chinese people across the Pacific that haven't yet bought a condo in Vancouver.
4. Unlike California, Las Vegas, Phoenix or Florida, it's too cold in Canada to live in a tent in a park, so Canadians HAVE to buy homes.
5. Canadians aren't seen to have reached true adulthood until they've: 1) had their first Molson, 2) lost their virginity and 3) borrowed money from their parents for a property down payment.
6. Our Communist government "won't let" house prices drop.
7. Land is scarce in Canada - after all "they aren't making any more of it".
8. We have "free health care" up here, which means more of our disposable income can go towards inflating house prices.
9. We respect our elders who counsel: home ownership is "an investment", renting is "throwing away money" and "if we don't help little Freddie with the down payment he'll never move out of the basement".
10. A $400,000 mortgage is a Canadian birthright - after all our national anthem is titled "Owe Canada".
Last edited by GRG55; December 29, 2014, 07:31 PM.
Right...two seasons, Winter and July. I do like to spend July in Canada even if you do serve poutine on your fries.
Two seasons, Winter and Mosquitos.
As for the poutine, we only do that east of the Ottawa River. Out here in the West we serve our potatoes with steak...but if the oil prices don't come back damn soon it'll shortly be a very thin single patty burger with those fries.
Here's a FRED chart of Canadian and American household debt to GDP ratios. Just sayin', there might be something going on up there. If I could just understand the Molson commercials...maybe I'd make sense of it all.
I've lived and worked in quite a few places where the economy is dominated by state owned enterprises. In most of these cases there are also usually restrictions on citizens sending or taking money abroad. This severely limits the options for private savings to be invested internally...small service and retail businesses, followed closely by property and stock market speculation are the most common alternatives. This was the situation I observed in the Persian Gulf in 2000. And of course they went through a lovely stock market and property bubble (and bust) led by the regional poster child, Dubai. This seems a common pattern when an authoritarian government starts to mildly loosen its grip on its economy and larger numbers of citizens start to become wealthier...and therefore earn more than they spend.
I suspect the recent official (and "look the other way" unofficial) relaxation on taking money out of China to invest abroad, the creation of the Shanghai gold exchange and the official urgings for citizens to buy gold are all part of finding alternate ways to vent the excess savings and direct them away from another stock market mania, or compounding an already difficult property bubble situation. The "reforms" that are being discussed in China, including promoting more consumption, will take a lot of time. The government and the PBOC know this.
So far the "China is buying gold and will take over the world, crush the USA and the US Dollar" crowd don't make any logical sense for this observer.
A year later the US$ continues to rise, the Chinese are still looking for a non-stimulus way to stimulate their economy, and the "buy gold for a glorious future" propaganda seems to be falling on deaf ears. But the efforts to rein in property speculation seems to have worked as the ubiquitous Mrs. Wong speculates elsewhere. Second time in less than a decade stock market fever has overcome the everyday Chinese housewife:
As Chinese individual investors pour back into the world’s hottest stock market, they’re leaving their fingerprints all over the place. The most telltale sign: The Chinese equivalent of penny stocks, assets that have long held an allure for amateurs, are trouncing the benchmark index.
Shares in China’s CSI 300 Index that were quoted below 5 yuan(81 cents) at the end of September have since jumped an average 63 percent. That compares with a 35 percent gain for all index stocks and 11 percent for those priced above 50 yuan.
That outsized rally reflects the growing market impact of inexperienced investors in a country where new stock accounts are opening at the fastest pace since 2007 and individuals comprise about 80 percent of equity trading...
... it’s the price appearing on computer screens that matters most to people like 35-year-old housewife He Mei. As she sees it, the math is simple -- low price equals low risk and lots of value.
“Expensive stocks are risky,” she said by phone from the southwestern city of Chengdu, the capital of Sichuan province. “Any drops will result in huge losses.”
He says she recorded a return of about 60 percent in her 300,000 yuan account since China cut interest rates in late November, versus 37 percent for the CSI 300. She bought her most profitable stocks at prices below 20 yuan and says she won’t touch shares above 50 yuan...
...The advance in low-priced equities, which is unique to China among the world’s five biggest markets, ratchets up pressure on the nation’s authorities to educate a new class of investors who had until recently avoided stocks in favor of real estate and banks’ wealth-management products...
A year later the US$ continues to rise, the Chinese are still looking for a non-stimulus way to stimulate their economy, and the "buy gold for a glorious future" propaganda seems to be falling on deaf ears. But the efforts to rein in property speculation seems to have worked as the ubiquitous Mrs. Wong speculates elsewhere. Second time in less than a decade stock market fever has overcome the everyday Chinese housewife:
As Chinese individual investors pour back into the world’s hottest stock market, they’re leaving their fingerprints all over the place. The most telltale sign: The Chinese equivalent of penny stocks, assets that have long held an allure for amateurs, are trouncing the benchmark index.
Shares in China’s CSI 300 Index that were quoted below 5 yuan(81 cents) at the end of September have since jumped an average 63 percent. That compares with a 35 percent gain for all index stocks and 11 percent for those priced above 50 yuan.
That outsized rally reflects the growing market impact of inexperienced investors in a country where new stock accounts are opening at the fastest pace since 2007 and individuals comprise about 80 percent of equity trading...
... it’s the price appearing on computer screens that matters most to people like 35-year-old housewife He Mei. As she sees it, the math is simple -- low price equals low risk and lots of value.
“Expensive stocks are risky,” she said by phone from the southwestern city of Chengdu, the capital of Sichuan province. “Any drops will result in huge losses.”
He says she recorded a return of about 60 percent in her 300,000 yuan account since China cut interest rates in late November, versus 37 percent for the CSI 300. She bought her most profitable stocks at prices below 20 yuan and says she won’t touch shares above 50 yuan...
...The advance in low-priced equities, which is unique to China among the world’s five biggest markets, ratchets up pressure on the nation’s authorities to educate a new class of investors who had until recently avoided stocks in favor of real estate and banks’ wealth-management products...
That quote had to made up - it is just too funny!
Hey, in a trending market, everyone is a genius; just look at all these hard working money managers who have been long SPX for the past 5 yrs; pure genius.
That quote had to made up - it is just too funny!
Hey, in a trending market, everyone is a genius; just look at all these hard working money managers who have been long SPX for the past 5 yrs; pure genius.
Apparently all those wealthy day trading Mrs. Wongs don't have time to go car shopping any more.
China’s car dealers are in open revolt over industry practices that have slashed profits, threatening growth prospects for companies such as General Motors Co. and Volkswagen AG in the world’s biggest auto market.
Retailers are banding together under the state-backed China Automobile Dealers Association to demand lower sales targets and a bigger share of profit from vehicle sales...
...China vehicle sales in 2014 rose at half the pace of the preceding year, a “new normal” according to BMW after surging growth in past years triggered by government subsidies.
“We can’t just keep on sucking it up,” said Richard Li, 40, a Toyota dealership owner who lost about 300,000 yuan last year after offering markdowns of as much as 16 percent on some models. “We have to negotiate with them and defend our rights. I will stop buying cars from them unless they step up their financial support.”...
...Distributors are also vulnerable because they have no say over the number of new outlets that a manufacturer adds to its sales network, says businessman Carson Guo, 41, who invested 82 million yuan to set up a two-story Mini dealership in Beijing in 2012.
“There are so many Mini stores in China now and dealers have to cut prices to sell cars otherwise we won’t be able to meet sales target,” said Guo, who estimates he has lost more than 20 million yuan since opening the 10,000-square-meter outlet. “Selling cars is costing us money instead of helping us make money. If automakers are not helping us out here, their interests will ultimately be undermined.”...
...“They were printing money,” he said of auto distributors in China. “Those kinds of margins were never sustainable.”
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