RECENT NEWS AND VIEWS FROM SHANGHAI RECENT NEWS AND VIEWS FROM SHANGHAI

CBRC's new capital adequacy rules are causing dramatic, and positive, changes in Chinese banks behavior.  Read my article in the Financial Times.  (click)
 
Shanghai residential real estate prices are headed down.  This is a buying opportunity in China¨s most attractive long term market.                    (click)
 
To grasp the reality of China one must think about individual Chinese.  Read my recent article.                     (click)
 

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News and Views from Shanghai

China 's banks have stopped lending not so much in dutiful compliance with State Council orders as in a near-panic response to the "new paradigm" regulatory regime brought in by the China Banking Regulatory Commission.(click here to view full article)

 

Like politics, real estate markets are a locally driven.   In the Shanghai residential real estate market, a number of local factors!most particularly a relentless stream of new supply, but also (the scariest part) the coming onto the market of resale units previously taken up by small and large speculators, against a situation in which virtually all currently available buyers have already bought--are pointing to a medium term correction and drop in (now artificially inflated) prices.  I expect a 30 percent drop over a period of two to three years.                                                             (click here to view full article)

 

When thinking of China, perceptions and attitudes tend to focus on symbols and abstract labels like communism and "market socialism."   But the key to understanding China is think about individual Chinese people, their recent history, their daily lives, and their dreams for tomorrow. (click here to view full article)

China's securities industry had a disastrous 2002.  The entire sector probably lost more than its capital in 2002, though it has so far managed to raise new capital and avoid collapse.  China needs a vibrant securities industry.   It will not get one until it really embraces the market and allows more privatization.  (click here for full analysis)

Mori Property's decision to go ahead with the 101 story World Financial Building in Pudong's Lujiazui is testimony that Shanghai has "arrived" as a financial center, or will have done so by the 2007 when the spectacular building is completed.  Morgan Stanley and CICC will help raise the Yen 1 trillion (about US$880 million) needed for the project.  Will investors make money?   My guess is that they will.   Sure winners are people who have bought or will buy apartments nearby this development.

My AWSJ Op/Ed piece on Chinese bank management and the need for real privatization makes two main points:  Firstly, still operating according to SOE practices and culture, Chinese banks are hardly "managed" in the normal sense of the term.  Rather, they are objects of what might be crudely described as plunder by managers and staff.   Secondly, only real privatization will change this situation.   (click here to view full article)

Should potential investors in China's financial companies accept the restrictions and go ahead.  Definitely.  The fact is that Chinese financial companies--virtually all SOEs and hardly "managed" in the normal sense of the term--are a virtual cornucopia of unrealized value.   Perhaps uniquely in the Chinese economy financial companies will yield huge and immediate returns to investors who manage to implement a few basic management disciplines and processes.

U.S.-China Commission Hearing: China¨s Capital Requirements and U.S. Capital Markets Thursday, December 6, 2001 Panel II C U.S. Capital Markets/China¨s Capital Requirements Testimony by Stephen M. Harner

  (click here to view full text )

The head of China's new bank regulatory agency proclaimed last week that "time is running out" for the country's state-owned banks to deal with their mountain of bad debts. Liu Mingkang's comments have encouraged the belief that a "big bang" solution in the form of a massive state-funded bailout is in prospect. (click here to view full article)

 
 

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