Archive

Reuters blog archive

from Breakingviews:

China’s car joint ventures aren’t built to last

Photo

By Ethan Bilby

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Chinese drivers are booming in number, and foreign auto companies have cruised away with most of the sales. But access to what is now the world’s largest auto market has come with a big financial concession: joint ventures with local partners. Those alliances haven’t fulfilled Beijing’s goal of developing competitive Chinese brands. That divided interest could lead to future break-ups.

When Beijing allowed foreign carmakers to set up shop in China in early 1980s, it wanted to make sure they didn’t kill off the nascent domestic industry. Foreign companies were required to enter into joint ventures with local manufacturers and to share technology with them. Each foreign carmaker is allowed to partner with up to two local groups in joint ventures.

Graphic: China's car joint ventures

Since then, China has surpassed the United States to become the world’s biggest car market. Sales of domestically-made passenger cars reached 16 million last year, according to Credit Suisse. Over two thirds of these were foreign models manufactured by Chinese joint ventures. Some of the top Chinese automotive companies are almost entirely dependent on selling overseas brands. For Shanghai’s SAIC, 89 percent of the passenger cars it sold last year were from joint ventures with General Motors and Volkswagen.

from Ian Bremmer:

Alibaba, Weibo and China’s potential for growth

In recent weeks, there has been a surge in Chinese tech sector IPOs -- including Alibaba, Weibo and JD.com -- all planning to list on American exchanges. They’re smart to list away from home: doing so will give them access to more liquidity, and allow them to avoid certain restrictions -- like the rule that companies cannot IPO in China if they haven’t yet turned a profit.

There are also compelling reasons for global investors to get excited about these offerings. China’s domestic consumer market is rapidly growing, and e-commerce is perhaps the most robust segment. There were over 6 billion parcels delivered in China in the first nine months of 2013 -- up a staggering 61.2 percent from the same period a year prior. Online shoppers received half of those packages.

from Breakingviews:

Time to bust China’s “omniscient regulator” myth

Photo

By John Foley 

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

China’s clever bureaucrats can no more guarantee the health of the country’s financial system than they can see through walls. It is time to bust the myth of the “omniscient regulator”.

from Breakingviews:

China tech rout sifts IPO haves from don’t-needs

Photo

By John Foley 

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Falling prices of internet stocks are a headache for companies yet to join the market. The sell off that began in the first week of March and broke on April 8 hit Chinese companies particularly hard. It may leave investors pickier about coming initial public offerings of tech companies from the People’s Republic. The haves will be sorted from the don’t-needs.

from Breakingviews:

China stock market opening is opposite of Big Bang

Photo

By Peter Thal Larsen

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

China’s approach to opening up its stock market is the opposite of a Big Bang. Investors are once again getting excited about the prospect of mainland shareholders being allowed to buy Hong Kong stocks. But such hopes have proved premature before. As with any loosening of China’s capital controls, progress is bound to be gradual.

from Breakingviews:

Alibaba shopping spree needs better explanation

Photo

By Robyn Mak

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

Alibaba’s shopping spree needs better explanation. The Chinese e-commerce giant has spent $3.8 billion on acquisitions and investments since 2013. The land grab may excite prospective investors ahead of its long-awaited initial public offering (IPO). But Alibaba will eventually have to justify its purchases.

from Breakingviews:

Noble China joint venture still faces market test

Photo

By Una Galani

The author is a Breakingviews columnist. The opinions expressed are her own.

Noble Group’s joint venture with China still faces a test from market forces. The Singapore trader is selling 51 percent of its agricultural business to a consortium led by state-backed COFCO for around $1.5 billion. China’s desire to control its food supply should guarantee volumes for the joint venture. But it’s less clear that will translate into healthy margins.

The precise size of the COFCO’s investment depends on how the unit, which processes everything from grains to coffee, performs over the next nine months. The final price will be equivalent of 1.15 times its book value in 2014. The headline price implies a valuation of $2.94 billion for the business, which accounted for 16 percent of Noble’s revenue last year.

from Breakingviews:

OCBC’s Chinese ambition comes with hefty price tag

Photo

By Peter Thal Larsen

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Oversea-Chinese Banking Corp is paying a hefty price to expand in the People’s Republic. The Singaporean group is realising a long-held ambition by splashing out almost $5 billion for Hong Kong’s Wing Hang bank. But the deal looks expensive at a time when growth on the mainland is slowing and the U.S. Federal Reserve’s tapering is threatening to push up deposit costs.

from MacroScope:

Erdogan unfettered

Investors have spent months looking askance at Turkey’s corruption scandal and Prime Minister Tayyip Erdogan’s response to it – purging the police and judiciary of people he believes are acolytes of his enemy, U.S.-based cleric Fethullah Gulen. But it appears to have made little difference to his electorate.

Erdogan declared victory after Sunday’s local elections and told his enemies they would now pay the price. His AK Party was well ahead overall but the opposition Republican People's Party (CHP) appeared close to seizing the capital Ankara. 

from MacroScope:

ECB uncertainty

For European markets, Germany’s March inflation figure is likely to dominate today. It is forecast to hold at just 1.0 percent. The European Central Bank insists there is no threat of deflation in the currency area although the euro zone number has been in its “danger zone” below 1 percent for five months now.

Having appeared to set a rather high bar to policy action at its last meeting, this week the tone changed. Most notable was Bundesbank chief Jens Weidmann, normally a hardliner, who said printing money was not out of the question although he would prefer negative deposit rates as the means to tackle an overly strong euro.

  •