Reuters blog archive

from Breakingviews:

Review: The worst of both Mao and markets

By Edward Chancellor

The author is a financial historian, journalist and investment strategist. The opinions expressed are his own.

Has the impetus for economic reform in China ground to a halt? Many China-watchers think so, citing state banks’ favouritism of state-owned enterprises (SOEs), the continuing monopoly power of state-owned “national champions,” and the effects of the massive fiscal and credit stimulus launched after the 2008 collapse of Lehman Brothers. Nicholas Lardy will have none of this.

In his new book, ”Markets over Mao: The Rise of Private Business in China,” a veteran China economist at the Peterson Institute, argues that the private sector in China continues to grow at the expense of the state-controlled parts of the economy. The data supports his claims. The trouble is that since Chinese national statistics are generally vague and sometimes downright unreliable, they can be used to justify wildly contrasting views of China’s economy.

There is no disagreement that the private sector in China has grown marvellously since economic reforms were initiated in the late 1970s. The markets for labour and the vast majority of inputs have been liberalised. There has been a huge influx of foreign investment. Private firms now account for around two-thirds of China’s economic output and an even greater share of industrial and manufacturing production.

from Breakingviews:

CITIC goes slowly on reform with $5.1 bln placing

By Una Galani 

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

CITIC Pacific is going slow on reform with its $5.1 billion placing. The Chinese group’s Hong Kong subsidiary will sell new shares to 15 investors as part of a union with its state-owned conglomerate parent. The placing allows CITIC Pacific to keep its stock market listing. Yet most of the money is coming from buyers also backed by the Chinese government. A deeper overhaul of state firms looks a way off.

from Global Investing:

Value or growth? The dichotomy of emerging market shares

Investors in emerging markets are facing a tough choice. Should one buy cheap shares in the hope that poor corporate governance and profitability will improve some day? Or is it better to close one's eyes and buy into expensively valued companies that sell mobile telephones, holidays and handbags -- all the things high-spending emerging market consumers hanker after?

At the moment, investors are plumping for the latter, growth-at-any price investment strategy. Result: a lopsided emerging equity index in which consumer discretionary shares are up more than 5 percent this year, energy shares have lost 7 percent while MSCI's benchmark emerging equity index is down 3 percent.

from Breakingviews:

Dividend reform won’t fix China SOE money-go-round

By John Foley

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

China’s elaborate money-go-round starts and ends with its cash-hoarding state-owned enterprises. So a plan to make them pay bigger dividends sounds promising. Still, if the goal is to return cash to the people, there is a long way to go.

from Breakingviews:

SOEs could be China’s economic vampire squid

By John Foley

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

State-owned enterprises are China’s economic version of the giant vampire squid. The 20,253 industrial companies owned and controlled by the government soak up capital, and pay little out. Their costs are low and their bosses powerful. If China’s new leaders are serious about making households wealthy, they need to make these industrial giants behave more like normal companies.

from Global Investing:

Can Eastern Europe “sweat” it?

Interesting to see that Poland wants to squeeze out more income from its state-owned enterprise (SOE) sector in the face of slowing economic growth and financing pressures.

Warsaw wants to double next year's dividends from stakes in firms ranging from copper mines to utility providers to banks.

from Financial Regulatory Forum:

Banks uneasy over report China state companies assert right to default on derivatives trades

By Eadie Chen and Chen Aizhu
BEIJING, Aug 31 (Reuters) - A report that Chinese state-owned companies will be allowed to walk away from loss-making commodity derivative trades provoked anger and dismay among investment bankers on Monday as they feared it may set a damaging precedent.

The State-owned Assets Supervision and Administration Commission, the regulator and nominal shareholder for state-owned enterprises (SOEs), told six foreign banks that SOEs reserved the right to default on contracts, Caijing magazine quoted an unnamed industry source as saying in an article published on Saturday.