Beijing’s young graffiti artists use derelict buildings as the canvas to share their take on the world.

Armed with spray paint, the graffiti team known as “Beijing Penzi” enthusiastically sets to work, giving a derelict building a new lease on life.

Graffiti is not encouraged in the Chinese capital, but the street art is beginning to creep onto the capital’s streets. Debate rages over whether it’s eye-catching or just an eyesore.

Beijing has its own graffiti custodian, known as LLYS. His blog gives regularly updated photographs of new graffiti appearing on the city’s streets. Or try Beijing Penzi member 0528’s blog.

To watch the full Reuters Report click here.

Michael Chiu, senior investment manager at ING Investment Management, has China Mobile as its biggest holding, and is overweight the banks as it plays down the potential impact of NPLs.

Pampered grapes and expensive price tags in China’s growing wine market.

The specially imported grapes at Bodega-Langes winery in Heibei province enjoy a constant concert of classical music from the vineyard right through to the cellars.

Just in case they suffer culture shock.    

China’s increasingly affluent society is testing its palette on grape wines, both premium and budget, and the potential market of 1.3 billion customers has enticed both foreign and local investors.

Click here to see the Reuters Report.

For more on China's wine scene, try the Grape Wall of China blog.

Bird’s singing, horses galloping, trains trundling along and even planes taking off are no challenge for Chinese professional mimic Cheng Jiaqiang.

He can imitate more than 100 noises, a skill he learned from his father, who in turn, learned it from his father.

Cheng and his menagerie can be found performing around Beijing.

If you’d like to see more of Cheng, watch the full Reuters Reports story here

When Taiwan President Ma Ying-jeou was elected ruling Nationalist Party (KMT) chairman in July, pundits jumped on the idea that he would use his new title to help secure a meeting with China’s President Hu Jintao. The first-of-a-kind summit would follow six decades of strained relations including China’s threats of military force against the island.

Ma’s new job, which he will take in mid-October, allows him to meet Communist Party Chairman Hu in a party-to-party role, laying aside each side’s presidential title. China does not recognise Taiwan’s presidency or other government institutions as it claims sovereignty over the self-ruled island.

Beijing’s state-run China Daily newspaper said such a meeting would signal “great reconciliation.”

A meeting would best take place in 2012, according to a KMT spokesman, Lee Chien-jung.

Before then, Ma will be wary of Taiwan’s divided public, Lee said. Taiwanese generally favour closer economic ties with China but oppose rushing into a relationship with the long-distrusted Communist government on fears that Beijing would compromise Taiwan’s self-rule, including its democracy. Ma will monitor opinion polls for any change in sentiment, the spokesman said, ruling out any meeting in the short term.

Ma could also be embarrased at home if Hu declined to acknowledge his title as president.

Odds of a meeting will surge in 2012 if Ma wins re-election by a big margin in March of that year, which would be an endorsement of China-friendly economic policies that have characterised his administration since he took office in May 2008.

“That interpretation wouldn’t be too far off the mark,” Lee said.

No doubt the KMT would also like to see political dividends from any momentum it can build ahead of the election for an expected summit that could occur if Ma were to win.

In an exclusive interview with Reuters on Monday, Ma said he would not exclude the possibility of meeting with China’s leaders one day, adding that there was no timetable for any such meeting. “At the moment, we have our hands full with economic issues,” he said.

Hu, expected to step down as president in 2013, might see 2012 as his last chance to meet Ma while in office — a historic moment that might qualify both sides for a Nobel Peace Prize.

Taiwan and China have tacitly agreed to lay aside issues of military tension, international space and sovereignty while they build up basic trust after 60 years of little or no official contact.

If the two sides break ice on these sensisitve political topics, in addition to the trade issues discussed to date, and can deliver any kind of tangible agreement beforehand, it would make sense for a summit 2012, said Raymond Wu, a political risk consultant in Taipei.

“If Ma’s political standing at home is solid and Hu is the undisputed centre of power, then yes, I think both would like to meet,” Wu said.

Photo: Taiwan President Ma Ying-jeou speaks in an interview with Reuters at the Presidential Office in Taipei on Oct. 19, 2009. REUTERS/Nicky Loh

How cheap is cheap?

That was the most frequently asked question among bankers and private equity experts attending a recent forum in Hong Kong, as they swapped strategies about how to pick up stressed assets during the financial crisis. 

When Lehman Brothers collapsed a year ago, everyone shared the same view: The global financial crisis was just beginning.

But one year on, many global markets have bounced off the bottom and some have recovered quite nicely. The Shanghai benchmark index, for instance, has gained more than 50 percent since the beginning of this year. As a result, views among bankers and top investment strategists about ongoing risks to the business outlook have started to diverge.

“Valuation is still a big threat,” said Michael Kim, a former senior Carlyle executive who founded MBK Partners after leaving the U.S. buyout giant.

“If a W-shaped recovery is going to happen, I think it will be a tremendous buying opportunity,” said Kim, referring to the possibility of a “second dip” market correction.

Andy Xie, former chief Asia economist at Morgan Stanley who earned his reputation in the financial industry as one of the most bearish analysts in Asia, forecast that a “second dip” in China’s market could occur next year.

“Markets will come down seriously, and China needs to increase money spending again, then you will see another rally,” said Xie, adding that speculative hedge funds could earn big profits in the subsequent rally.

But not everyone expects or is eager to see “a second dip”, especially those dealmakers who have already jumped onto the deal flow and believe they have successfully bet on the quick recovery early this year.

“How cheap is cheap? I think the price level is now reasonable, and in fact we already missed the bottom level, which was the time when Lehman Brothers went bankrupt,” said one forum delegate.

Another financial industry executive, who explained his outlook on valuations to reporters at the forum, said: ”To those who missed the chance to take advantage of the recovery in this round to buy some cheap assets early this year, they will definitely tell the public that the valuation is not yet cheap because they haven’t bought anything yet.

“To those who bought something early this year, now is the time for them to defend their investments so they keep saying prices will rise soon.”

He smiled, and posed a question for other dealmakers: ”How greedy is greedy?”

Photo caption: A man sitting at the Exchange Square in Hong Kong. REUTERS/George Chen

China’s propaganda machine and Internet are once again agog over Premier Wen Jiabao, whose public comforting of Chinese earthquake victims last year cemented his reputation for having a common touch.

China’s Communist Party rarely admits mistakes, but Wen got kudos for facing up to his.

Wen, a trained geologist, mixed up his rock types while giving feedback to a Beijing middle school teacher, who had failed to encourage a student while Wen was sitting in on some classes this weekend.

Xinhua included the mistake when quoting his remarks.

Wen corrected the error and issued a public apology via Xinhua — giving new meaning to the term “official correction.”

But even the apology was not without some spin. The Beijing News said an alert reader had noticed  the error and alerted Xinhua, but the subsequent article by the state news agency said Wen himself had spotted the flub.

File photo: REUTERS/Jason Lee

Chinese regulators might think that a tough stance on takeovers prevents domestic bidders from overpaying for overseas targets. This approach has helped prevent unwise deals. But, as the takeover of General Motors Co's Hummer business shows, Chinese bidders may have to pay more to compensate for the regulatory risk at home.

Deep-pocketed Chinese buyers are increasingly appearing as potential buyers of assets overseas. But as well as grappling with protectionism in target countries, they also face unpredictable regulatory decisions at home. Foreign sellers are increasingly demanding that Chinese bidders pay more to compensate for these risks.

There have been many reports over the last few months that Beijing would not allow Sichuan Tengzhong Heavy Industrial Machinery to buy the manufacturer of gas-guzzling cars. The concern was that a deal would fly in the face of Beijing's goal to reduce carbon emissions. There were also doubts about Tengzhong's ability to manage a foreign brand.
The debate did not kill off Tengzhong's bid. However, it may have lengthened the negotiations, which have taken a year. GM had little choice because it had no other credible bidders lined up. However, other sellers that have a choice of buyers are unlikely to wait that long.

Moreover, there is a possibility that Tengzhong might have been forced to pay a bit more to convince the seller that they can pull it off. The final purchase was reported to be $150 million for the ownership of the brand, though this does not include key technologies which remain largely off-limits to the Chinese.

Beijing has used its veto power several times in the past few years. For example, in July 2008 the cabinet rejected a request by China Development Bank to raise its stake in Britain's Barclays Plc. That decision looked smart when market turmoil hammered Barclays shares a few months later. However, it has added to the nervousness among foreign companies about whether Chinese investors are reliable.
While it is important to have the regulatory checks and balances in place, Beijing can do its own companies a favour by acting more professionally. China used to be in shrouded in darkness. Now it is in a transition phase, where many people who have little to do with the decision making process are eager to express their views.

Foreign media, meanwhile, can also do a better job interpreting messages from Beijing. They need to understand that there is a big difference between the regulator, people close to the regulator, and the state media. All the conflicting messages only make Western sellers more nervous.

When there is a choice of buyers, Chinese companies are at a disadvantage compared to Western rivals. Beijing Auto almost missed the deadline to bid for GM's Opel, probably because it had to talk to various constituencies first and agree on a proposed price. This is not to say that U.S. protectionism and regulatory hurdles have not thwarted Chinese bidders. But China's lack of responsiveness and inflexibility make it even more difficult for Chinese companies to win highly competitive bids.

Some might argue that this is a good thing. After all, most mergers and acquisitions fail to justify their purchase price, and competitive auctions tend to have an even lower success rate. However, it might come as a surprise to the Chinese government, which is encouraging Chinese companies to make more strategic acquisitions abroad, that its gate-keeping could be hurting the very companies that it wants to protect.

As gold prices surge to a new record, China's retail investors are trading more of the yellow metal, often using borrowed money. This is further evidence that recent high prices may not be sustained.
Like investors around the world, Chinese individuals are buying gold because they are worried about inflation. After all, Beijing has already pumped an unprecedented amount of money into the system, sending asset prices higher. But Chinese retail investors are also known for their herd behaviour. Despite the recent sharp rise in gold prices, many have decided to jump in.

This is lucrative business for Chinese banks. During the first six months, mid-sized Xingye Bank, which offers gold trading business with Shanghai Gold Exchange, traded 20.9 billion yuan ($3 billion) worth of gold for its clients, almost three times as much as they did last year.
Other than earning a commission for buying and selling for their clients, the bank is also making a gamble itself. It traded 15.3 billion yuan ($2 billion) worth of gold on its own account, up 15 percent from last year.

Risks can be big for Chinese investors. Like most retail investors, they are often at a disadvantage to international institutions because they lack up-to-date information. Moreover, big price changes in global markets often happen when China is asleep.

A greater source of concern, however, is that investors are placing leveraged bets. Leverage is not allowed in China's stock market, that's why people eager to maximize their returns have flocked to gold trading. At Xinye Bank, customers are allowed to borrow as much as 90 percent of the value of the gold contracts they are buying. Investors are also allowed to sell gold short, though most of them are choosing to place long bets. It is not uncommon for investors to use three to five times of leverage.

The risk does not stop with Chinese individuals, however. What happens in China can have a significant influence on world prices. China, already the world's biggest gold producer, has also become the precious metal's biggest consumer, overtaking India in the first half of this year.

Chinese gold purchases for investment reached a record high of 70 tonnes in 2008. That is 6 percent of the global amount which includes the sort of bullion, official coins and metal for investment purposes, according to the World Gold Council. Globally, retail demand for investment purposes increased 72 percent in 2008.

There are plenty of legitimate reasons for investors to buy gold. It is a hedge against inflation, and the ultimate store of value. But gold is just as prone to speculative bubbles as other asset classes -- particularly if investors are leveraging their bets. China's bullish retail investors are another reason investors should be wary about the latest gold price surge.