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

Dan Loeb is taking Japan’s economic renaissance at face value: the hedge fund manager wants Sony to spin off its entertainment arm. Though activists rarely prevail in Japan, Loeb’s idea may have merits. The electronics giant should take him seriously.

Compared to his sometimes caustic attacks on U.S. corporations, Loeb’s May 14 letter to Sony Chief Executive Kazuo Hirai is studiously polite. He argues that Sony’s movie and music operations aren’t performing as well as some peers, and would do better if publicly listed. Loeb suggests an IPO of 15-20 percent of the entertainment unit, raising 150-200 billion yen ($1.5-$2 billion) that Sony could use to help turn around its troubled electronics businesses. What’s more, Loeb’s Third Point fund is willing to underwrite the offering without charging a fee.

The merits of Loeb’s plan are open to debate. Sony has long argued that movies and music help its hardware business – for example, by turning blockbusters into Playstation games – though it has struggled to quantify those benefits. Unlike rival Sharp, Sony is not desperate for cash. Hirai, who took charge a year ago, can claim that his turnaround plan needs to be given more time. Besides, Sony is not exactly a troubled stock: its share price has doubled since the beginning of the year, helped by the falling yen.

Yet it would be a mistake to dismiss Loeb out of hand: his proposal values the entertainment businesses at more than half Sony’s current market capitalisation. As he has demonstrated at Yahoo and elsewhere, he is not scared of a drawn-out public fight. Most importantly, Third Point controls – directly and through swaps – around 6.3 percent of Sony. That alone should assure the fund a serious hearing.

Sony’s initial response – that its entertainment businesses are not for sale – is therefore disappointing. It’s true that Japan tends to give short shrift to activists: even the Olympus scandal didn’t rouse the country’s institutional investors. But Sony – and the rest of Japan Inc – should reflect that the recent stock-market revival rests in part on a belief that entrenched attitudes are shifting. Dismissing Loeb out of hand would suggest that optimism is misplaced.

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

Alex Ferguson’s retirement should worry Manchester United’s fans and investors as much as it delights long-suffering rivals. His triumphant 26-year reign has gone hand-in-hand with the soccer club’s equally impressive financial rise. Ferguson’s departure will reveal how much of that value depends on the manager.

Plaudits for the 71-year-old will rightly focus on his triumphs on the pitch. In his 26 seasons in charge, Manchester United won an astonishing 13 English Premier League titles, five English FA Cups and twice claimed Europe’s Champions League.

Yet Ferguson’s tenure also coincided with British soccer’s emergence as a global sport, with Manchester United as its chief beneficiary. He has seen the club float on the stock market twice – in London in 1991 and in New York last year. In between, a takeover by Rupert Murdoch’s British Sky Broadcasting was blocked by UK competition authorities, and Manchester United succumbed to a leveraged buyout by U.S. financier Malcolm Glazer.

Over that period, the club’s value was driven higher by growing television and sponsorship income, ever-higher ticket prices, and an unerring ability to sell replica shirts to distant fans who would struggle to locate Manchester on a map. Murdoch’s 1998 offer valued the then lightly-indebted club at less than $1 billion. On May 7, the day before Ferguson’s retirement was announced, Manchester United’s equity was worth just over $3 billion – and it still has around $675 million of gross debt.

Investors will probably assume that value rests on what Glazer once called “a wonderful franchise”, not Ferguson’s management prowess. Europe’s soccer elite is self-perpetuating: successful clubs generate the most income, allowing them to attract the best players and staff to ensure continued triumphs.

Yet if money were the sole determinant of success, Ferguson’s record would not be so impressive. In the past two decades he has faced challenges from free-spending rivals including Blackburn Rovers, Chelsea and most recently Manchester City. Each time, Manchester United fought back to reclaim the title, urged on by Ferguson’s man-management skills and sheer determination to win. It’s also worth remembering that Manchester United failed to win the league during his first five seasons in charge. Fans and investors will not be so patient with his successor.

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

Hong Kong’s port strike is over, but the tensions that sparked it remain. Dockers are feeling the squeeze of Hong Kong’s rising living costs, while port operators face challenges from China’s slowing and shifting economy. Labour relations look set to stay tense.

The resolution of the month-long dispute looks like a victory for Hong Kong International Terminals (HIT), operator of the port where the 500 dockers worked. They agreed to return to work on May 6 after accepting a 9.8 percent pay rise – less than half their original demand, and only marginally more than the original offer. The immediate financial effect of the stoppage is minimal. Shares in Hutchison Port Holdings, the Singapore-listed trust that controls HIT, have actually outperformed other operators like China Merchants over the past month.

Nevertheless, the dispute cast a spotlight on Hong Kong’s growing social divisions. The dockers’ decision to target Li Ka-shing, the Hong Kong tycoon whose Hutchison conglomerate is the port’s ultimate owner, gave the strike an added edge. In an echo of the Occupy movement, they camped outside Li’s central Hong Kong headquarters, protested outside his home, and called for a boycott of his other businesses. Hutchison stoked up the rhetoric by comparing the dockers’ tactics to those of China’s Cultural Revolution.

It’s hard to see many other Hong Kong workers adopting similar tactics: the former colony’s service-heavy economy depends mostly on white-collar workers who tend to be less prone to strikes and collective bargaining. Nevertheless, the dispute has dented the reputation of the world’s third-busiest port as efficient and reliable. It has also called into question the viability of HIT’s reliance on contract workers for two-thirds of its workforce.

Over time, these factors may divert shipping traffic to other destinations on the mainland. China’s slowing economy and its gradual shift away from low-cost manufactured exports will add further pressure. Hutchison has some protection from any shift: it owns a port in Shenzhen that handles almost as much traffic as its Hong Kong ports. The dockers have fewer options. Their taste for activism may only speed the decline of the business that employs them.

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

China may be a long way from its “Minsky moment”. Rising leverage has prompted many to predict the kind of financial meltdown theorized by the economist Hyman Minsky. But China’s closed, state-controlled system is well placed to postpone such market panics. The bigger challenge is managing social tensions arising from slowing growth.

Minsky’s “financial instability hypothesis” described what the academic considered a structural feature of capitalist financial systems. The “speculative finance” of an economic boom, loans refinanced before they are repaid, yields to the “Ponzi finance” of a bubble, where borrowers take on new debt just to pay the interest on existing loans. A crash follows.

Many investors believe speculative finance is rampant in China. The total amount of new credit expanded by roughly 60 percent in the first quarter, but GDP growth was a mildly disappointing 7.7 percent. Corporate balance sheets are deteriorating: according to the International Monetary Fund, the earnings of Chinese companies were just 2.4 times interest payments in mid-2012, down from 4.4 times in 2003.

Then there are local governments, which have used financing vehicles to finance property development and infrastructure. Nobody seems sure quite how much they owe: a former Chinese finance minister recently put the figure at 20 trillion yuan ($3.25 trillion), double the officially estimated amount of loans.

To top it all off, debt is increasingly backed by short-term instruments, such as wealth management products which are distributed by banks but tend to be held off their balance sheets. As these investments mature every few months, the risk that savers will lose confidence is ever present. Ponzi-finance may have already arrived, and fears of a Minsky-meltdown would appear well-founded.

However, the Minsky-ites seem to have forgotten that their teacher thought a strong government could counter the destructive dynamics of unchecked financial capitalism. The Chinese state is probably still sufficiently powerful and financially active to prevent a meltdown.

For a start, it is the controlling shareholder of all the largest banks. The government can mandate that loans be rolled over or new credit extended. This is exactly what it did to counteract the 2008 economic slump. The state can also direct banks, insurers and other investment companies to keep buying corporate and local government bonds.

And if investors’ confidence did crack, the government could bail out the banks or the local governments directly. It did exactly that in 2003, by removing bad debts from banks’ balance sheets.

A repeat would undoubtedly be messy, and would send the level of government debt soaring. According to George Magnus of UBS, adding up local government debt, banks’ bad loans as well as bonds issued by state institutions and the now-defunct Ministry of Railways would lift the state’s total borrowings to 80 percent of GDP – more than four times the official figure.

Still, a rescue would be largely a domestic concern. Unlike most big countries, China does not depend on international investors. With tightly controlled capital flows, no foreign debt to speak of and more than $3 trillion in foreign currency reserves, the country is largely insulated from any Minsky-style run by international investors. A large-scale bailout would essentially involve reallocating resources from Chinese people to the Chinese state.

However, avoiding a panic could ultimately cause as many problems as it solves. Rescuing lenders and borrowers from their mistakes would reinforce the belief that, in China, normal market rules do not apply. That would further delay the point at which the country starts allocating capital on the basis of economic efficiency, rather than state direction.

Moreover, even if China avoids a meltdown, it can no longer continue to rely on credit to boost the economy. If less new lending slowed down job creation and the property market, an important store of wealth for China’s new middle class, the social consequences would be a huge test for the government’s political legitimacy. China’s “Minsky moment” may turn out to be not financial, but social.

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

Alibaba has spotted hidden treasure in Sina Weibo’s social network. The e-commerce giant is paying a punchy price for roughly 18 percent of China’s microblogging phenomenon, a business that has not yet celebrated its fourth birthday and is still working out how to generate revenue.

Alibaba has taken a positively contrarian view of Weibo’s worth. The $586 million investment implies a valuation of $3.26 billion – close to the entire pre-announcement market value of Sina Corp, Weibo’s parent company. The implication is that Sina shareholders are putting no value on the company’s existing web portal business and $700 million in cash and short-term investments. If Alibaba is right, the 9 percent jump in Sina shares on the news is far too stingy.

Weibo’s new valuation looks demanding, however. Like their counterparts at Twitter and other Western equivalents, the company’s management is struggling to convert enormous clout on the web into cash in the bank. Weibo started experimenting with ads last year. In 2012, they provided just 12 percent of Sina’s advertising revenue – about $50 million.

The investment has potential benefits. It could help point Weibo’s 46 million daily users towards Alibaba’s online stores, or give retailers seamless access to Weibo’s platform. The two reckon such vague synergies will generate more than $120 million in additional annual revenue for Weibo over the next three years.

But Alibaba may be thinking less about gains than about potential losses. Roughly four out of every five yuan currently spent on e-commerce in China travel across its platforms. Alibaba wants to defend this from potential rivals such as Tencent, which has captivated users with its WeChat free mobile messaging service. WeChat doesn’t currently enable e-commerce, or make any money, but such innovations cannot be ruled out. With a high-profile initial public offering in the works, Alibaba could use Weibo to give its own mobile strategy a boost.

Even so, more than half a billion dollars in cash – more if Alibaba exercises an option to raise its Weibo stake to 30 percent – remains a big bet. Alibaba must hope that its prospective investors share its enthusiasm.

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

Nomura has spent most of the past five years trying to break out of Japan. So it’s ironic that the investment bank’s best full-year results since 2007 were propelled by a revival at home. As with Japan’s economic renaissance, however, investors’ hopes are running ahead of reality.

In a quarter when Japan’s Topix stock market index jumped 35 percent, the country’s biggest brokerage was always going to clean up. Revenue in Nomura’s retail division in the first three months of 2013 was 50 percent higher than in the same period of 2012 as investors snapped up stocks and mutual funds. Pre-tax profit almost trebled.

Nomura’s wholesale bank, too, had a domestic tinge. Revenue from Japan more than doubled from the same period of last year, and accounted for almost half the division’s total income. In other parts of the world, business in the Americas held up best. Europe and the rest of Asia – the areas Nomura hoped to beef up when it snapped up parts of Lehman Brothers in 2008 – were the laggards.

Capital is a bright spot. Nomura’s core Tier 1 capital ratio at the end of March was 11.7 percent. Fully applying new Basel III capital rules reduces that to 10 percent – still better than several larger rivals. Nomura’s problem is generating a return on that capital. The bank’s full-year return on equity was an unimpressive 4.9 percent, which implies it is still destroying value.

Earnings should improve again in the coming year as Nomura gets the benefits of its $1 billion cost cutting programme without the associated severance costs. Even so, it faces several potential risks. The most immediate worry is that prime minister Shinzo Abe’s policies fail to deliver the hoped-for Japanese economic revival, or that his administration proves as short-lived as those of his many predecessors. Meanwhile, Nomura’s fixed income revenues depend on central bank money-printing continuing to pump up the bond markets.

Nomura shares, which have more than doubled in value since Abe was elected in mid-December, now trade at roughly 1.3 times the bank’s book value. That leaves precious little room for disappointment.

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

Steve Schwarzman is giving something back – to China. The Blackstone founder is contributing his name, and $100 million of his private wealth, to kick-start a scholarship programme at Beijing’s Tsinghua University. The programme may not be entirely philanthropic: China lost much more investing in his buyout firm’s initial public offering. But there will still be many beneficiaries if the scheme helps Western and Chinese elites understand each other better.

Like the Rhodes Scholarship that inspired it, Schwarzman’s scheme will fund the brightest and best to study overseas. In this case, the $300 million programme will select some 200 “Schwarzman Scholars” from the United States, China and other countries to spend a year studying at Tsinghua. Whereas Cecil Rhodes wanted future leaders to visit his alma mater of Oxford University, Schwarzman is sending them abroad to gain a better understanding of the world’s rising economic and political power.

There is bound to be skepticism. Schwarzman’s $100 million pales next to the losses China’s sovereign fund made when it invested $3 billion in buyout firm Blackstone in 2007. Though the shares have recovered somewhat from the depths of the financial crisis, China Investment Corporation is still nursing a near-$1 billion loss. Corporate sponsors such as BP, Boeing and Bank of America will no doubt view Schwarzman’s scheme as a way to improve their influence on the mainland. And the heavyweight advisory board – which includes the likes of Tony Blair, Nicolas Sarkozy and Hank Paulson – is also noticeably light on Chinese luminaries of equal stature.

Yet these objections do not undermine Schwarzman’s cause. China’s rapid rise and insular tendencies mean the country’s leaders have little experience and understanding of their counterparts elsewhere. For Western leaders, the country remains mysterious and impenetrable. That has already led to tensions, which are only likely to increase as China flexes its growing economic and political might. If Schwarzman’s scheme helps future leaders gain a better understanding of each other, any less high-minded motivations will be forgotten.

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

Here’s a radical career choice for investment bankers: become a Chinese citizen. American-born Marshall Nicholson has swapped his U.S. citizenship for a Hong Kong passport. Though the move is largely for family reasons, it will also go down well with clients on the mainland. For Western financiers seeking a local edge, it’s the ultimate display of commitment.

Nicholson joins a small but select group – including Tina Turner and Eduardo Saverin – who have taken the irreversible step of returning their U.S. passports. While the pop diva chose Switzerland and the Facebook founder moved to Singapore, Nicholson has opted for Hong Kong. It’s hardly an impulse decision: he has lived in the region for 11 years and has a Chinese wife. As a managing director of China International Capital Corp, he’s also one of a handful of Westerners working for a Chinese investment bank.

The number of people turning their backs on the United States remains small: last year, just 933 gave up their status as citizens or long-term residents, according to a list published by the Federal government, down from 1,780 in 2011. By comparison, the United States welcomed close to 700,000 new citizens in 2011, including more than 30,000 former Chinese nationals.

For the departing few, tax is a factor. Switching passports is the only way to escape the U.S. fiscal net – though only after a lengthy process that includes a one-off tax on assets. Career considerations weigh too. The global financial crisis diminished the previous appeal of investment bankers trained in the West. Moreover ,foreign financiers in Hong Kong are often suspected of regarding their stay as a staging post before returning to London or New York. What better way to demonstrate long-term staying power with potential clients than flashing a local passport?

Of course, investment bankers are only as good as their advice. And local citizenship doesn’t guarantee better treatment in China – or elsewhere. But in an industry suffering from overcapacity and intense competition, playing the China card may just make all the difference.

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

A weaker yen won’t reverse Japan Inc’s overseas M&A drive. While a strong currency, low interest rates and a stagnant home market fuelled an international shopping spree in 2012, the promise of a domestic revival under new Prime Minister Shinzo Abe has caused buyers to temporarily put away their wallets. But even so-called Abenomics can’t cure Japan’s ageing and shrinking population.

Last year marked a high point for globetrotting Japanese merger advisors. Deals like Softbank’s audacious $20 billion takeover of U.S. mobile operator Sprint – now facing a counterbid from pay TV operator Dish Network – lifted overseas purchase activity to a record $84.6 billion. With Japan stuck in a deflationary slump and the strong yen hollowing out the country’s manufacturing base, a growing number of companies chose to gamble on foreign expansion.

Abe’s arrival has temporarily slowed the exodus. The prime minister’s policy of central bank money-printing, fiscal stimulus and structural reform may have prompted some companies to revisit their plans. The yen’s slide hasn’t helped: it has dropped roughly 15 percent against the dollar since Abe was elected, crimping Japanese companies’ spending power. In the first quarter, they discharged just $6.2 billion on foreign acquisitions, down from $15.3 billion in the same period of 2012.

Yet there are good reasons to believe the foreign investment drive will continue. First off, the yen isn’t that weak. Six years ago, it was 20 percent lower. Japan’s buoyant stock market – the Nikkei 225 index is up 37 percent since mid-December – has boosted confidence and may allow companies to finance deals with equity as well as debt. Besides, a bit more inflation won’t reverse Japan’s demographic decline. Companies that rely on selling more stuff to consumers will have to look towards other markets.

Hopes of a revival of foreign interest in Japanese companies also look premature. Some troubled industries will find it harder to retain non-core businesses: ailing electronics group Panasonic, for example, is considering a sale of its healthcare operations. Western private equity groups are also increasingly active in Japan. But foreign companies hoping to buy in Japan still face formidable cultural and regulatory hurdles. Whether or not Abe’s policies are a success, the balance of Japanese M&A will remain overwhelmingly outward bound.

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

Sundance Resources is a case study in what ails Chinese-led takeovers. The Australian miner’s deal to sell itself to Hanlong Mining for $1.4 billion is under pressure after its suitor’s chairman was apparently arrested. The 18-month saga highlights the hurdles facing Chinese bidders, and explains why suitors are often met with scepticism.

The arrest of Liu Han by Chinese authorities, reported by Shanghai Securities News on March 20, is a dramatic turn. Sundance’s CEO is “not confident” the Chinese company will meet a March 26 deadline to prove it has the financing for the deal. However, it is merely the latest in a series of setbacks.

Regulators were the main obstacle. China’s National Development and Reform Commission, which must approve virtually all foreign takeovers, last year asked that Hanlong pay a “reasonable acquisition price” for Sundance. Even after the Chinese company cut its offer 10 percent to A$0.45 a share, the NDRC decided Hanlong needed a large Chinese partner.

Financing is another problem. When Hanlong first struck the deal, it didn’t have the funds to complete the takeover: it wasn’t until October 2012 that China Development Bank “in principle” agreed a $1 billion debt facility. That still hasn’t been finalised.

Finally, there’s patronage. Political support is almost impossible for outsiders to gauge, and can shift quickly. Until now, Liu was sufficiently in favour that he was allowed to buy a controlling stake in another Australian group, Moly Mines, and sign a deal to help a U.S. company mine molybdenum in Nevada.

Sundance may have been right to entertain Hanlong’s bid despite these concerns. The $5 billion needed to develop its iron ore project in central Africa was always most likely to come from China, and the authorities tend to discourage Chinese companies from bidding against each other. Despite the company being free to seek other offers, none have emerged.

Sundance shareholders are pricing for the worst. The company’s shares were suspended on March 19 at 22.5 Australian cents – half the value of Hanlong’s bid. The latest setback could not have been foreseen, but more scepticism at the beginning would have spared them recent pain.