BREAKINGVIEWS: JLR far from becoming China’s next top model
By John Foley
HONG KONG (Reuters Breakingviews) – Jaguar Land Rover wants to be China’s luxury brand of choice, but it is taking a circuitous route. The high-class car maker, owned by Tata Motors, has announced a joint venture with China’s Chery Auto, a state-owned producer known for being cheap and cheerful. As a strategy for snagging a bigger share of China’s giant auto market, this is risky.
It’s easy to see why luxury brands want more of China, now the world’s biggest car market. Jaguar Land Rover’s sales there grew 58 percent by volume in the fourth quarter of 2011, year on year. While sales of passenger vehicles overall have slowed, and even luxury models are being discounted by dealers, the underlying trend for trading up is still strong. Audi, BMW and Mercedes Benz are the top brands, thanks to their own joint ventures, and BMW reckons China could become its biggest market this decade.
China reform may require a deeper crisis
By John Foley
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
“Reform” might turn out to be this year’s most overused word in China. The country’s outgoing premier Wen Jiabao, and his likely successor Li Keqiang, have both recently spoken of the urgent need to change. Even Communist Party mouthpiece People’s Daily advised last month that it’s better to have imperfect reforms than a crisis caused by none at all. The trouble is that China lacks external creditors or voters to hold leaders to account and make these reforms a reality.
Purges and paranoia weaken China’s crisis defences
By John Foley
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Purges and paranoia are making an unwelcome comeback in China. Bo Xilai, the showman-like party chief of Chongqing municipality, was ousted on March 15 after a scandal surrounding a close aide drew a surprisingly sharp attack by outgoing premier Wen Jiabao. This spectacle makes little difference to China’s short-term ability to grow rapidly. But a divided China may be less well equipped to grow in the long term, or handle economic shocks.
China’s march to currency dominance just got longer
By John Foley
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
China’s path to currency dominance just got a bit longer. Hong Kong holdings of the Chinese yuan fell in January, according to data out on March 1; there has been an 8 percent decline since the end of November. With the yuan no longer certain to rise in value, foreigners have much less reason to hold it. For a would-be reserve currency, that’s a real spanner in the works.
StanChart doesn’t justify premium over HSBC
By John Foley
HONG KONG, Feb 29 (Reuters Breakingviews) – Both emerging
market lenders had a strong 2011, in different ways. StanChart
is growing while HSBC restructures. But StanChart is relatively
bigger in troubled India and Korea, while hiring has become
expensive. Takeover hopes aside, the valuation gap is hard to
justify.
Full view will be published shortly.
CONTEXT NEWS
– Standard Chartered, the UK-domiciled emerging market
lender, reported $6.8 billion of pre-tax profit in 2011, an 11
percent increase on the previous year. But between the first and
second halves of the year, pre-tax profit fell 14 percent,
driven by higher expenses and an increase in loan impairments.
HSBC looks like best of a bad bunch
By John Foley
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Being HSBC is about as good as it gets in global banking right now, but that only shows how much the sector is challenged. Europe’s biggest bank has healthy capital, an enviable funding position and a sizeable exposure to emerging markets. Even so, HSBC was dragged down by the euro zone crisis in 2011.
Political flameout shows risks hidden in China
By John Foley
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Twin political flameouts in China deserve investors’ attention. The tribulations of Bo Xilai and Henry Tang teach a valuable lesson about the political risk premium.
Obama and Xi may make unhappy Valentines
By John Foley
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
The Valentine’s Day summit between Xi Jinping and Barack Obama could make for uncomfortable viewing. China’s likely next president is due to meet the U.S. leader in Washington – as his predecessor did 10 years ago. Only this time the stakes are higher. Obama, facing a November election, is under pressure to talk tough. Xi is under pressure to stay cool, while appeasing hardliners back home.
Don’t bet against Glenstrata antitrust roadblock
By John Foley
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Glencore’s tie-up with Xstrata may not harm competition. But that won’t stop regulators from trying to wrap it up in red tape for several months. As the two miners head into a $90 billion all-share merger, competition watchdogs from China to South Africa, Australia and Europe will get a chance to probe into the two companies’ business, and impose conditions on an eventual union.
China has moral high ground over “dirty skies”
John Foley
The author is a Reuters Breakingviews columnist. The opinions expressed are his own
China is fighting for its right to pollute. The government has banned Chinese airlines from paying a pointless new European emissions tax. The argument isn’t really about the environment. It’s about China’s “don’t intervene” foreign policy, which also led it to veto a U.N. resolution against Syrian President Bashar al-Assad on Feb. 4. This time China has the moral high ground.
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