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Dec 4, 2012
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SEC learns true cost of China accounting goodwill

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By John Foley

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

China’s shaky accounting practices are a sound target for U.S. regulators. Or at least, they would have been ten years ago. The Securities and Exchange Commission’s action against China-based auditors, including affiliates of big accountants like KPMG and Deloitte who refuse to hand over files on U.S.-listed companies, comes too late. If the SEC pushes the point, it could bring a moral victory, but a financial mess.

Nov 26, 2012
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China’s nemesis: bribes, banquets and backslapping

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By John Foley

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

Corruption is to China what bad weather is to Britain – a source of constant complaint, and a fact of life. But the rise of the Internet and slowing growth mean China can’t continue along its old path. Incoming President Xi Jinping and his chief graft-buster Wang Qishan have a chance to slay the beast. Enforcement, education and the market will be their most effective weapons.

Nov 15, 2012
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China’s leadership line-up gets 6.5 out of 10

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By John Foley

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

The seven men who will run China’s ruling party for the next five years have a tough job. Two of them, party chief Xi Jinping and premier-in-waiting Li Keqiang, have been groomed for years, but even they are little known. Are they up to it? Breakingviews has scored them on five key criteria, and found some scope for encouragement.

Nov 14, 2012
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China buzzword bingo shows slow move forward

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

China’s rulers give little away. So at the five-yearly Communist Party Congress, details matter, from the order the new leaders come onstage to the arrangement of portraits on the front page of People’s Daily. To see what’s on the mind of outgoing party leader Hu Jintao, there’s another option: buzzword bingo.

Nov 13, 2012
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SOEs could be China’s economic vampire squid

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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.

Nov 8, 2012
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How to make sense of China’s leadership line-up

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By John Foley

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

China’s big reveal of its top party leadership deserves careful reading. A day after the Communist Party congress ends on Nov. 14, a group of suited officials will take the stage, and China-watchers will try to make sense of who’s there and who isn’t. Xi Jinping is virtually assured the top spot; the rest are less certain. Here are five clues that the new line-up of the Politburo Standing Committee might offer about China’s direction in the next decade.

Nov 5, 2012
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Chinese reforms could trigger domino effect

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By John Foley

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

What does China want? Sustained growth, and happier citizens. How will it get there? Through economic reform. It sounds simple enough.

Nov 1, 2012
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China “hard landing” talk abates, but not for long

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By John Foley

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

China’s hard landing is the catastrophe that wasn’t. A return to expansion in the closely watched official survey of purchasing managers released on Nov. 1 leaves the Chinese economy on track for GDP growth of around 7.5 percent for 2012. The Breakingviews Tea Leaf Index, which combines a more eclectic group of indicators, also showed that conditions are improving. But talk of a punishing downturn will recur, because China’s economy remains unbalanced.

 Breakingviews China Tea Leaf Index

The big threat to China’s growth remains real estate, which contributes roughly 15 percent of GDP, and in reality much more, through its effects on consumer goods sales, wages and confidence.

Oct 30, 2012
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Three reasons China’s banks deserve their derating

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By John Foley

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

China’s banks enjoy valuations most Western rivals would kill for. But compared with the earnings they are throwing off, their share prices look miserly. The country’s seven biggest banks trade at an average of 1.2 times their most recently reported book value, according to Reuters Eikon, despite aggregate returns on equity above 20 percent. Five years ago, lesser returns allowed them to command multiples above 4.5 times book. Though the derating is harsh, it’s justified.

Oct 26, 2012
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China insider exposé is explosive and predictable

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By John Foley

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

Fix one problem, and along comes another. On the day China expelled disgraced politician Bo Xilai from its parliament, a New York Times investigation alleged that Premier Wen Jiabao’s family controls financial assets worth $2.7 billion. The suggestion is explosive, particularly of a leader who has spoken out about inequality. But it is also mundane, and won’t much change the calculus for investors in the People’s Republic.