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Sunday, 24 March 2013

Floating corpses...

In the wonderful booming economy of China, everything is in demand, or so the official line goes. Around the world, people and businesses expect China to have an insatiable demand for everything.  Even as a recent Beyondbrics post points out, burial space - the following extract gives some flavour of the demand for sea burials in Shanghai:

And not everyone is lucky enough to be buried in Shenyang – or in fact, in the ground at all. The Shanghai government recently increased subsidies it pays for sea burial fivefold, from Rmb400 ($65) to Rmb2,000, leading to an explosion of would-be seafaring corpses. Some families were told they would have to wait until 2015 to have their relatives buried, until the government was able to persuade another ship owner to add his vessel to the sea burial fleet. It is hoped this will clear a backlog of 2,000 urns of ashes waiting to be scattered at sea.
In 2010, government officials were predicting the city could run out of room to bury its dead by the end of the decade. Shanghai Daily says so far 25,000 urns have been emptied at sea, saving more than 75,000 square meters of burial land. The city wants to boost sea burial to 2 per cent of total burials, up from 1.5 per cent now.
As the article notes (and has been extensively reported worldwide), these are not the only corpses which are floating around China now or into the future, as recent weeks have seen discoveries of large numbers of animal carcasses in waterways, including those feeding municipal water supplies.  No reasons have been given by officials for the discoveries, although there is speculation that it may be an unintended effect of recent food safety crackdowns.

This provides an interesting backdrop amidst attempts by the top leadership to focus on greater wellbeing of ordinary citizens.  But it is reflective of the corporate atmosphere in China at the moment as well.  Last week saw the first Chinese bond default as the main subsidiary of former solar giant Suntech entered into bankruptcy.  This had been predicted by many for some time (and noted on this blog) and the fundamental weaknesses remain in the industry, as the opportunities for solar panel cells remain troubling.

How many other floating corpses will there be in China?  Probably a lot.  In addition to other Chinese solar companies like LDK and Chaori which are also facing significant weakness, signs of trouble in bigger state-owned companies were also present with news that CNPC was planning to sell stakes in certain pipeline projects (the linked article mentions strained working capital - not a good sign).

Strong earnings in the corporate sector are supposed to ensure that there is a successful rebalancing of the economy- with growth in Chinese consumer spending and slowing of exports.  At least on the consumer side that does not seem to be happening.  Local sportswear retailers, once the darlings of various stockmarkets when they listed shares a couple of years ago, are predicting tough conditions for this year, while international brand Nike has seen declining sales in comparison to this time last year.

Any doubts as to the difficulty of the consumer story in China should be satisfied by the below picture - taken from queues of people who attend a McDonald's restaurant promotion which involved a free breakfast giveaway.  While the comments section of the article was full of debate as to why those queuing would cover their faces - the below image does not suggest a land of happy rampant consumerism!

Caption competition
On a final note we are welcoming suggestions for a caption for this picture, which is of the underside of a newly built bridge in Nanning city, which unfortunately only clears a pedestrian walkway by 1.3 metres.  Prizes to be announced!

Tuesday, 5 March 2013

Crunch time!

Very contrasting news and images coming out of China at the moment.  While Wen Jiabao was singing his final swansong at the Party Congress this week amidst the formal handover of power, property owners were fleeing to government offices to process property sales before the hastily announced 20% capital gains tax commences.  It is intended to slow down rising property prices.  It may have burst the bubble instead.

Express filing, Shanghai style

He did it his way
Wen's China was on display for all American's midweek when longtime China Watcher Gillem Tulloch, of ForensicAsia (with the assistance of others behind the scenes like Patrick Chovanec), took CBS' 60 minutes team for a walk through China's ghost cities.  The empty shopping centres, half started office blocks and empty landscape is one of Wen's legacies.

Another legacy is the opening up of reporting on social issues, along with professed policies by the leadership to do something about it.  Reports have circulated of polluted "cancer villages" and the below from a Daily Mail piece captures the mood at the moment:
The Chinese government has promised to tackle 'cancer villages' - areas where pollution is so bad it has lead to a huge rise in diseases like stomach cancer - after a huge social media backlash from both ordinary Chinese people and global campaigners.There has been an explosion of outrage about cancer villages on China's social media sites and blogs, which are used by increasingly powerful activists to raise awareness.
But problems run deep.  As in the case of Dalahai, a village in Inner Mongolia profiled by Caixin magazine which has suffered from a nearby radioactive tailings dam, the villagers must drill to increasing depths to tap water which is safe to drink.  It is a moot point anyway as many villagers have fallen ill, moved away or given up hoping for promised though inadequate compensation.

Going green
The Green agenda was supposed to be one of the highlights for Wen's legacy with the push for renewables and various environmental policies which have also failed.  Instead the policy failure so evident in the Beijing smog has been upstaged by tycoon and philanthropist Chen Guangbiao, who made headlines for a number of radical stunts, including  selling cans of fresh air, recommending Chinese people eat less, and attending this week's Congress by bike, in a green suit.  While refreshing it is uncertain how likely any of his recommendations will be to advance the agenda.

The wrong type of green (c) Reuters

The dead hand of the State
One of the big obstacles to reform is the vested interests of state enterprises.  Caixin had an excellent piece on the failures at the top of State shipping company Cosco which took up the completely wrong strategy and is now hemorrhaging cash.  The FT mentioned the role that the head of M&A champion Sinopec had, in weakening regulation to restrict the sulphur content of its refineries near Beijing which have caused much of the smog.  And on the green side, Caixin has just reported details of the termination of the head of Suntech, the failed solar company which officials were saying should have been consollidated with all the other failing solar companies by now.

Most worringly in a market where risks are dire and State Owned Enterprises have lavished shareholder funds - the property sector (which is now tanking), one key sensible measure - that the SOEs withdraw from the market, has been ignored.  This and everything else does not bode well.

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