Greece is a democracy with a free press and subject to the restrictions of the EU. China actively suppresses information. To determine the state of the Chinese economy it is sometimes necessary to look outside some of the official reports. Like discovery of the structure of DNA, it is necessary to look at shadows and in China’s case the shadows are looking very scary
While the world has woken up to Greece’s debt problems, China is actively suppressing information. To determine the state of the Chinese economy it is sometimes necessary to look outside some of the official reports
The problems in Greece have caused an international financial crisis. Like the sub-prime meltdown in the US, the question is why weren’t the problems in Greece identified sooner? The reason is simple. The problem was hidden. But Greece is a small country of barely more than 11 million people. Shanghai alone has over 16 million and if China is hiding a disaster, it is a much bigger problem. Odds are that it is.
In Greece the present debacle was discovered when the newly elected socialist government revealed a double-digit deficit in October 2009, a deficit that was almost three times the previous forecast. It wasn’t a mistake. The Greek bean counters had been at this game for a long time. According to Eurostat, the European Union statistical agency, Greece distorted its numbers to get into the European Union (EU) in 2001.
The terms of Greece’s bailout require it to clean up its numbers. It had to create an independent watchdog headed by a former International Monetary Fund (IMF) official to police Elstat, the Greek statistical agency. Greece’s numbers have gotten better, but not without a fight from the Elstat’s union and board of directors. According to a former statistical service official “It seems that board members wanted to go back to the old days when officials at the finance ministry and the central bank got together to produce figures that served the national interest, regardless of accuracy”.
But Greece is a democracy with a free press and subject to the restrictions of the EU. China actively suppresses information. To determine the state of the Chinese economy it is sometimes necessary to look outside some of the official reports. Like discovery of the structure of DNA, it is necessary to look at shadows and in China’s case the shadows are looking very scary.
A very large shadow is the underground banking system. Chinese state-owned banks loan money mainly to local governments and state owned enterprises. They also pay interest on deposits that are only 3.5%, almost 3% less than the reported inflation rate of 6.2%. So wealthy individuals lend money to capital-starved private businesses at higher interest rates. Recently the businesses have been going bust.
The newspaper of the Communist party, the People’s Daily, referred to this problem as “a Chinese-style sub-prime crisis”. It is not just the businesses that are going bust, but private lending operations. No one knows exactly how big the private lending is in China, but estimates are that lending in 2010 alone was 4 trillion renminbi.
Often when loans go bad, they are referred to as a bankruptcy or a default, but these are western terms. They imply that creditors receive something. China has a bankruptcy law, but like most laws in China, it is ignored. Bosses of small companies just disappear with any assets they can carry.
It is not just the locals in China that are getting burned. The shadows are extending beyond China. Chinese real estate developers alone have sold $19 billion in debt on international markets. International investors faced with nominal interest rates in the US and Europe and hungry for yield gobbled them up assuming constant Chinese growth. The yields have increased it is true, but for the wrong reason. Prices of these bonds have plunged an average of 22 cents on the dollar in the past two months alone and at least a dozen developers are in danger of default. If past experience is any guide, creditors of a defaulted Chinese company can expect little or nothing.
Chinese sovereign debt has been sold as some of the safest in the world. The Chinese leadership has disparaged the downgrade of US debt, proudly espousing the superiority of their system. But things may change. The credit-default swap (CDS) market has been the bane of sovereign credit in Europe. It may have found a new victim. Two years ago the Chinese CDS market was only $1.6 billion, the 227th in the world. Now it is 10th at $8.3 billion, larger than the markets for Portugal or Bank of America. It is beginning to flash red. This week China CDS hit a two-year high of 208 basis points. It has fallen since then to 173 about the same level as France.
In the past the United States was often a country’s largest trading partner. Today it is often to be China. As China slows, so do their economies. The PMIs (Purchase Manager’s Indices) for both Australia and Taiwan are showing a major drop to 42 and 44 respectively. The price of commodities like copper and soy have fallen 27% and 11%, which will eventually impact the economies of Chile, Peru and Argentina. Most of Asia is exposed.
Most of the world thinks that Greece is the problem. They are wrong. It’s not.
(The writer is president of Emerging Market Strategies and can be contacted at [email protected] or [email protected]).
These amendments were proposed based on an extensive consultation with the Telecom Regulatory Authority of India. The move is expected to deter non-serious applicants from “crowding the electronic media landscape”
New Delhi: In order to deter non-serious applicants from “crowding the electronic media landscape”, the government on Friday decided to increase the net worth criteria for those seeking permission to run TV channels in the country, reports PTI.
The Union Cabinet cleared an information and broadcasting (I&B) ministry proposal as per which the net worth criteria for uplinking of ‘non-news and current affairs’ channels and downlinking of foreign channels has been revised from Rs1.5 crore to Rs5 crore for the first channel.
Companies will have to show an additional net worth of Rs2.5 crore for each additional channel, an official release said.
For uplinking of ‘news and current affairs’ channels the net worth has been increased from Rs3 crore to Rs20 crore for the first channel and Rs5 crore for each additional channel.
Companies would henceforth be required to operationalise new TV channels within a time frame of one year from the date of permission, the release said.
In the event of non-operationalisation of the permitted channel within a year, the Performance Bank Guarantee (PBG) will be forfeited and permission cancelled.
For non-news and current affairs channels, companies will have to sign a PBG of Rs1 crore whereas news and current affairs channels will have to pledge a PBG for Rs2 crore.
Aspiring companies should also have at least one person occupying a top management position like chairperson, CEO or COO with a minimum three years media experience to seek permission for a new channel.
The period of uplinking or downlinking of channels will be uniform at 10 years, after which renewal would be considered, the release said.
For teleports, the net worth criteria would be uniform irrespective of channel capacity. The net worth criteria would remain Rs3 crore for the first teleport and Rs1 crore for every additional teleport.
Permission fee for uplinking or downlinking of TV channels and setting up of teleports would be Rs2 lakh per channel or teleport per annum.
The permission fee for downlinking of TV channels uplinked from India would be Rs5 lakh per channel per annum.
Permission fee for downlinking of TV channels uplinked from abroad would be Rs15 lakh per channel per annum.
These amendments were proposed based on an extensive consultation with the Telecom Regulatory Authority of India (TRAI), the press release said.
Currently, the I&B ministry has granted permission to 745 private satellite TV channels, out of which 366 TV channels fall in the category of news and current affairs and 379 in the category of non-news and current affairs.
The workers are demanding that the casual labourers of the Manesar plant, who have been kept out by the management after signing a deal to end a 33-day long stand-off with permanent workers, be taken back
Manesar: Workers at Maruti Suzuki India’s (MSI) Manesar plant went on a strike on Friday afternoon demanding that their colleagues, who are contract and left out in the pact that last week ended the 33-day-long stand-off, be taken back.
The stir was supported by workers in different factories belonging to various companies at the Gurgaon-Manesar industrial belt, including Suzuki Powertrain India, Suzuki Motorcycle India Pvt Ltd and Satyam Auto, reports PTI.
“A sit-in protest by workers has started inside the Manesar plant around 4pm yesterday afternoon,” an MSI official told PTI.
There are an estimated 2,000 workers inside the factory, which includes about 700 regular workers.
The company, however, claimed around 170 of regular workers are not taking part in the strike and left the plant after duty.
Workers are demanding that the casual labourers of the Manesar plant, who have been kept out by the management after signing a deal to end a 33-day long stand-off with permanent workers, be taken back.
In support of the casual labourers, who are on a protest in front of the Manesar plant, workers at factories of different companies also went on strike.
“It is unfair not to take back the casual workers while the permanent workers have been allowed to resume duties,” Suzuki Motorcycle India Employees Union president Anil Kumar said.
Last month, workers at Suzuki Powertrain India and Suzuki Motorcycle India Pvt Ltd had gone on two-day strike in support of MSI’s Manesar plant workers during the standoff.
“This time we are not going to back off till the Maruti management fully implements what they have promised,” Mr Kumar said, adding production at the plant of the two-wheeler maker has come to a halt since late afternoon yesterday.
Similarly, a worker at Suzuki Powertrain India, which supplies diesel engines to MSI, said production at the company’s Manesar plant has stopped since the second shift.
Around 400 workers at Satyam Auto also went on strike, showing solidarity with the casual workers of MSI’s Manesar facility.
Workers also claimed similar strikes occurred at factories such as Hilux Autoelectric and Endurance during the day. While officials of these companies could not be reached for comments, Hilux Autoelectric chairman Surinder S Khanuja denied any such development.
When contacted, Honda Motorcycle & Scooter India Employees Union president Suresh Gaur said: “We have not gone for the strike yet. We are waiting for the authorities to take initiative to resolve the issue.”