China Money Podcast – Audio Episodes show

China Money Podcast – Audio Episodes

Summary: Listen to China-based fund managers, analysts, dealmakers and economists discuss investment opportunities in China, with our host Nina Xiang. Subscribe for real local business knowledge and insights on investing in China.

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 Howard Marks: Investors Should Be Cautious In Today's Markets | File Type: audio/mpeg | Duration: 27:18

In today's podcast, we hear Howard Marks, chairman of Los Angeles-based distressed debt giant Oaktree Capital Management, discuss Oaktree's organic growth, where he sees attractive investment opportunities in distressed debt today, and how will the U.S. Federal Reserves' reduction of its quantitative easing programs impact Oaktree's businesses. Marks gave the following comments at the Goldman Sachs Financial Services Conference in New York. Read an excerpt below, but be sure to listen to the full interview in audio above. Don't forget to subscribe to the podcast in the iTunes store to automatically receive future podcasts. Q: How will the U.S Federal Reserves' reduction of the quantitative easing programs impact Oaktree's businesses? A: First, the question I get asked the most often nowadays is "when will the Fed taper?" (This question) is the most irrelevant. If it's going to rain tomorrow, you bring an umbrella. But you don't sit around and think: Is it going to rain at twelve or two (o'clock). I think tapering should and will happen. But I don't think it's going to mean that much because (interest) rates have already adjusted (to the expectation of tapering). In addition, I don't think that the businesses are so strong, the demand for capital are so strong and inflation is so high that the natural interest rates would be much higher than they are now. The impact on Oaktree will not be so great. Interest rates are not the main determinant of value in the things that we do. Impact on our bond holdings, mostly in high yield bonds, is limited. Q: How has Oaktree been growing and where is Oaktree headed? A: When we started in 1995, we had 7 strategies. Today, we have diversified to around 20. We have grown steadily and organically. If you look at our chart of our asset under management (AUM), it appears that it has been fluctuating. In 2001 and 2002, we raised $3.5 billion while historically our funds have been around $1 billion. We've made half a billion in carried interest on that. Then in 2007 and 2008, we raised $11 billion. So far, we've made $2 billion of carried interest. Aside from these two periods, we have had steady and gradual growth of around 10% to 11% (of AUM) on average. We are well on our way of making 2013 the seventh year in a row when we add $10 billion or more in new money. Q: Are you finding very few distressed debt opportunities in the market place today? A: There is absolutely a paucity of bargain price distressed opportunities. The opportunities are in a few packages: shipping, power, non-prime real estate and Europe. Even there, there are no forced sellers. .....

 Chris Rynning: When Valuations Differ, Creative Convertibles Provide An Answer | File Type: audio/mpeg | Duration: 36:58

In this episode of China Money Podcast, guest Chris Rynning, CEO and founder of Beijing-based private equity firm Origo Partners, talks to our host Nina Xiang about the performance of his London AIM-listed shares; how did he find an investment opportunity in a lithium battery maker in Xinxiang City, Henan province; and how he plans to exit his clean tech investments. Read an excerpt below, but be sure to listen to the full interview in audio above. Don't forget to subscribe to the podcast in the iTunes store to automatically receive future podcasts. Q: China's November official PMI number just came out this weekend at 51.4, unchanged from Oct's 18-months high. What is your feeling of the business environment in the sectors you are involved in? A: If you look beyond the headline numbers, you will see that the largest enterprises are expanding the fastest while the small and medium enterprises (SMEs) indicators are receding. It shows that the largest companies are benefiting from China's fixed asset investment and infrastructure built up, but the SMEs are not doing so well because of the credit tightening. Q: Give us an introduction of Origo Partners? A: We are a private equity firm listed in London and headquartered in Beijing. We focus on investing in SMEs in the natural resources and clean tech sectors in China. We have three funds in addition to managing our own balance sheet. The value of our balance sheet fluctuates, but is roughly about $300 million. Our funds combined have over $100 million. The bulk of our money is in foreign currencies but we have some RMB capital. We have about 20 to 25 portfolio companies, some are legacy companies in the traditional natural resources sector and some are Chinese clean tech companies. Q: Some statistics of your shares listed on London AIM (Alternative Investment Market) market look intriguing. For 2012, your revenue was -38.72 million pounds, and earnings per share growth was -2696.33%. Can you explain? A: The liquidity of London AIM is relatively low, so small volumes can move the stock very significantly. During good times, we have been trading at a premium to our net asset value. But now we are trading at a deep discount to our net asset value. One key reason is that the IPO market has been shut for the past a year and half. It's difficult to exit our portfolio companies. The traditional sectors that we are involved in such as coal, copper and gold, have underperformed. On top of that, the global macro environment has been anemic. Our revenue and earnings have come down significantly during the past year or two. That is the result of our investments' being recorded mark-to-market. Yes, our revenues and earnings are very bumpy. Now things are brightening up a bit. The hopes are that China comes back and emerging markets come back, we will be able to sell some of our assets. In the meantime, we are focused on building our existing portfolio companies. ......

 Anla Cheng: China's IPO Market Might Open Sooner Than You Expect | File Type: audio/mpeg | Duration: 26:17

In this episode of China Money Podcast, guest Anla Cheng, partner at Sino-Century China Private Equity Partners, talks with our host Nina Xiang, about the importance of protecting intellectual property for companies in China's financial information sector, why she thinks China's IPO market might open sooner than expected, and her hopes for the realization of substantive reforms in China. Read an excerpt below, but be sure to listen to the full interview in audio or watch an abbreviated video version. Don't forget to subscribe to the podcast in the iTunes store. Q: Can you give us a brief introduction of Sino-Century China Private Equity Partners? A: Sino-Century was founded in 2005 by three partners. Our founder, Dr. Hong Chang, used to work at the municipality in Pudong, Shanghai. He was one of the 25 financial architects who built the Pudong district. Therefore, he's very close to the build-up of China's financial center. We launched our first RMB fund in 2007 focused on small and medium enterprises (SME). We focus on three sectors: financial information and services, which is the mainstay of our fund. About 50% of our assets are invested in this area. The other two are high-end manufacturing and sustainable environment. Q: Do you currently only manage one fund? A: We are onto our second fund. Our first fund initially planned to raise $150 million. Then the financial crisis hit and we closed at $73 million. It is mainly in RMB, but also has about 15% of assets in U.S. dollars. We had several exits already and were hoping for another exit last year. Then the IPO market got closed. But we are on the "queue," of which there are about 800 companies waiting to go public in China. There are about 40 to 80 companies that already received approval to list, one of which is a company we invested. We are in the final stage of marketing our second fund, which we are targeting $250 million. It's going to be predominately in U.S. dollars because our founder has always a vision to become an international fund. Q: There are media reports saying that Sino-Century invested RMB84 million in Wind Info for a stake of 7% to 9% in 2007. Are they accurate? A: Yes. Initially, we invested about $12.7 million for a stake above 7%. Two years after we made the investment, CITIC PE bought a share at about three times of our valuation, and our share got diluted a bit. Q: Intellectual property is critical in this sector. Wind Info has sued competitors for IP infringement last year, and others have sued Wind Info for the same cause. Do you think lawsuits are effective in protecting IPs in China? A: Probably not as effective as in other places, but at least it's a beginning. Wind Info's pending lawsuit (against Zhejiang Hithink Flush Information Network Co.) is dragging on a bit but I believe Wind Info has a strong case. ....... Anla Cheng is partner at Sino-Century China Private Equity Partners. Before joining Sino-Century in 2007, she was the founder of Centenium Capital. Previously, she was senior vice-resident of Robert Fleming for Asian investment; institutional head of the Asia desk for Prudential Bache and portfolio manager at Citibank Asia Asset Management. She started her career at Goldman Sachs.

 Jim Rogers: China Should Open Up Its Financial Markets Now | File Type: audio/mpeg | Duration: 26:18

In this episode of China Money Podcast, returning guest and veteran investor Jim Rogers, chairman of Rogers Holdings, talked with our host Nina Xiang on his reading of China's third plenum meeting, why China should open its financial markets completely "this afternoon", and what Chinese stocks he has been buying lately. Read an excerpt below, but be sure to listen to the full interview in audio or watch an abbreviated video version. Don't forget to subscribe to the podcast in the iTunes store. Q: The just completed third plenum meeting provided a road-map for China's future reforms. It created this renewed sense of optimism about China's future. Do you share that feeling? A: I was quite delighted to see what they said. The one overriding point is that the market is going to make the final decision. That is contrary to what is happening in the U.S., and that is why the world is moving to Asia. Q: The policy initiatives may look near perfect on paper, but no doubt the most challenging part will be implementation. What do you see as the biggest risk in implementation? A: In the past few years, the momentum (for reform) in China has slowed because of vested interests and their fear of losing power. The new leadership now says let's move on and just do it. But it won't happen with a snap of the finger. Q: What would you like to see in China's financial reform? A: They should make their currency, the RMB, convertible this afternoon. They started (currency reforms) in 2005 and have taken many small steps. But China is no longer a weak economy. It is the most successful country in the past thirty years. There is nothing to fear. Q: Interest rate liberalization, floating the currency and opening up capital accounts, which one should come first? A: I would think all of the above this afternoon. But they've been very slow and only taken small steps. Deng Xiaoping says you cross a stream by feeling one rock at a time. That's correct. But there comes a time when you get to the other side, and let's move ahead. China is on the other side now. Q: How worried are you about capital outflows if the capital accounts are opened now? A: Of course there will be capital outflows. The RMB may even go down for a while. But just do it and get it over with. There will be a lot of capital inflows as people like me want to put money into China. Have you ever heard of people smuggling money into a country with capital controls? No. People in China are trying to get their money out. But there are also many people who want to rush into China. This is the point of a free and open market. Trust me, it's not the end of the world. The Australians, Germans and Japanese used to worry about (opening up capital accounts). But somehow they all survived. Trillions of dollars flow in and out everyday in the foreign currency market. China will survive too. Q: You have been bullish on the RMB for a long time, but the RMB only appreciated for roughly 12% since 2008. You can't say that it's a great performance as an investment? A: That depends on what you compare with. There are many other currencies that were down. We presume one has earned interest as well even if it's just put into a CD (certificate of deposit). Don't forget that those interests get compounded. But you are right, there are many other investments that could have made a lot more money. But the point is the currency has continued to appreciate and will continue to appreciate. It may be double or triple in the next 10 to 20 years. Q: Are you buying Chinese company shares now? A: Yes. Q: Can you give us a couple of those names? A: I've never bought Chinese domestic A shares in my life because it's always more expensive. But I've been buying H shares and overseas-listed Chinese companies for the first time in a while. One company I bought was HollySys, a supplier of automation and control applications to China's subway and railway sectors.

 Patrick Chovanec: The Chinese Economy Is Slowly Strangling Itself | File Type: audio/mpeg | Duration: 26:21

In this episode of China Money Podcast, guest Patrick Chovanec, chief strategist at New York-based Silvercrest Asset Management, talks with our host Nina Xiang about why he thinks the Chinese economy is slowly strangling itself, how to read beyond China's headline economic data and what he expects from the Chinese Communist Party's third plenum meeting. Read an excerpt below, but be sure to listen to the full interview in audio and subscribe to the podcast in the iTunes store. Q: China's imports and exports in October reached $339.7 billion, up 6.5% year-on-year. Last week, the Oct official PMI number reached 51.4, hitting the highest level for 18 months. Is China's economy really improving, or is this the same old window dressing before an important political meeting? A: People tend to be very schizophrenic about the Chinese economy. They see either the bad news or the good news, and say either everything is going to implode or everything is back on track. Now we seem to be in a cycle where GDP was higher and (economic data appears to be better) as you mentioned. But I don't think things are back on track at all. For example, it's getting harder to interpret Chinese export numbers. There is a disconnect between the reported Chinese export numbers and the freight shipments out from Hong Kong. It's masking capital inflows to China as Chinese companies are borrowing cheap U.S. dollars and bringing them into the country dressed as export. Then they speculate in real estate and in re-lending. Q: What kind of trend do you see in the latest M2 and new loan numbers, two economic indicators playing a critical role to China economic performance at the present? A: What we have seen in the past couple of decades is that the Chinese economy was forging ahead using the export-led growth model. But it's not exports driving growth per se. It's exports that enable a much greater level of investment that would otherwise be possible – that's turbocharging the economy. So when external demand (for Chinese exports) slowed down, China doubled down on investment. That's the worrying thing. Because those investments have created capacity, which needs an end user that today has to be domestic demand. That's why an internal re-balancing is at the core of the coming third plenum meeting. We have seen an explosion of credit lately, which in absolute terms makes 2009 stimulus pale in comparison. So credit has been driving more investment and growth. This is a model that Premier Li Keqiang said himself that it's not sustainable. This dependence on run-away credit growth to both drive investment and also paper over past investments that have gone bad, means that the Chinese economy is slowly strangling itself. It may not be obvious looking at the headline numbers. I'll give you an example. Chinese companies reported increase in earnings during the first half of this year. But well over half of that came from banks. Of the non-financial companies, all of the increase in earnings, plus more, came from non-core activities. That means speculation in properties, re-lending to shadow banking, etc. Actually core earnings were down. That says to me that the Chinese economy is unsustainable and needs to be fixed. The greatest sign is the freeze up in the interbank lending market. A lot of people dismiss that as a blip on the radar screen and is easily fixed by the People's Bank of China. In fact, it showed the dependence on credit expansion. Q: During the past month or so, there have been at least a dozen announced or completed IPOs in Hong Kong and the U.S. Are Chinese IPOs coming back? A: Given my outlook for the Chinese economy, people would say, then your investment advice would be to run away from China as far away as possible? The answer is no. There will be real economic adjustment that will be destructive, but there will be winners and losers both in sectors and companies. U.S.

 Zhanlian Feng: An Aging China Provides Nascent Investment Window For Senior Care Sector | File Type: audio/mpeg | Duration: 22:32

In this episode of China Money Podcast, guest Dr. Zhanlian Feng, senior research analyst in the Aging, Disability and Long-Term Care Program at RTI International, talks with our host Nina Xiang about the enormous demand in China's senior care industry, its regulatory environment and the lucrative business opportunities it presents. Read an excerpt below, but be sure to listen to the full interview in audio and subscribe to the podcast in the iTunes store. Q: In 2010, there were 119 million Chinese aged 65 and older, and this number is projected to more than triple to 382 million by 2040. The demand for senior care in China is obviously enormous. What is the situation of senior care supply? A: You are right. Some of the statistics in China are alarming. There are estimated 36 million elderly Chinese who need living assistance. It's also estimated that there are about 9 million Chinese with dementia. The real number might be higher as the diagnosis is difficult. In 2010, there are estimated 114 million elderly Chinese with diabetes. These are all chronic diseases that need long-term care. In addition, among all the families with an elderly person, more than half are empty nesters. In some cities, it is as high as 60% to 70%. But the supply of senior care is inadequate. Though there is no official number, but it is estimated that there are 40,000 residential care facilities in China. There are about 3.2 million beds in total, and around 2 million elders live in these facilities. This translates into a ratio of less than 2% of seniors who live in senior care facilities as a percentage of total senior population, much lower than 5% or 6% in much advanced economies. ........ Zhanlian Feng is senior research analyst in the Aging, Disability and Long-Term Care Program at RTI International. He is also an adjunct assistant professor of health services, policy and practice at Brown University. His research focuses on the disparities in U.S. long-term care and the growth of institutional elder care in China.

 Stephen Roach: Fears Of A China Slowdown Are Vastly Overblown | File Type: audio/mpeg | Duration: 32:51

In this episode of China Money Podcast, our guest is Stephen Roach, current senior fellow at Yale University’s Jackson Institute of Global Affairs and former chairman of Morgan Stanley Asia and the firm's chief economist. He spoke with our host, Nina Xiang, on the Fed's tapering of its quantitative easing programs and its impact on China; a potential U.S. default and what that means for China's over $3 trillion foreign reserves; and why he believes the fears of a China slowdown are vastly overblown. Listen to the full interview in the audio podcast, watch an abbreviated video version (coming soon) or read an excerpt below. Be sure to subscribe to the podcast in the iTunes store. Q: What impact will the U.S. Federal Reserve's reduction of its quantitative easing (QE) programs have on China? A: The policy experiment of the Fed is very risky. It's untested. It's unconventional. In my view, it's a big mistake. Initially, the policy grew out of a deep and legitimate concern of the U.S. and the world economy in crisis. Lacking a leeway in cutting interest rates, which were near zero, the Fed embarked on asset purchases, or liquidity injections. The Fed continued to do it even as the crisis ended and the economy attempted to recover. Last month, when the Fed surprised the market by backing off from QE, it found out that it might be difficult to get out from what could be a "policy trap" that it set itself. China would be adversely impacted if the global economy were dealt a blow by the Fed's policy withdrawal. Where China is exposed to any direct impact (from the U.S.) is if the U.S. were to default on its sovereign debt. China, with its $3.25 trillion foreign exchange reserves and the biggest share being U.S. dollar assets, could be hit very hard. Q: With the U.S. in the middle of a government shutdown, can you walk us through what you think is the worst-case scenario if a U.S. default takes place? A: It's pretty straightforward. The yields of U.S. treasuries will go up. They will no longer be given the premium of the riskless assets that lies at the core of the world's financial systems. How much it will go up, for how long? It's hard to know. That would certainly result in a loss in the value of any Treasury-based securities. Q: If you were the governor of the People's Bank of China (PBOC), how would you manage China's foreign reserves differently? A: The dollar-denominated concentration of China's reserves is very much tied to the currency policy of the PBOC. If the Chinese government were to significantly reduce their exposure to U.S. dollar-based assets, then the RMB would rise, possibly significantly, against the U.S. dollar. The RMB has risen close to 35% against the U.S. dollar since mid-2005. The Chinese exporters have dealt with it well and managed to maintain their competitiveness. If there were to be a sharp further appreciation of the RMB because of a U.S. default or other reasons, it would put pressure on Chinese exporters. A U.S. default, which I still believe is a low probability outcome for a sustained period of time, or intensification of U.S. trade frictions that could cause retaliatory reactions from the Chinese, could cause the RMB to appreciate suddenly. But ultimately, I think the best case is to expect gradual further appreciation of the RMB. Q: What policy initiative would you like to see coming from the Third Plenum of the Party Congress in November? A: I like to see initiatives aimed at providing broader support to Chinese consumers. The top of my list is to inject public funds into the social safety net institutions like social security and healthcare. The enrollment has increased a lot, but the assets in these plans are small and the benefit streams are limited. I like to see interest rate liberalization for deposits, and I'd like to see Hukou reform. Q: About China's property market, when do you think the bubble will burst?

 Keith Robinson: China's New Regulations Provide Greater Clarity For Hedge Fund Industry | File Type: audio/mpeg | Duration: 26:01

In this episode of China Money Podcast, guest Keith Robinson, partner in the financial services group at law firm Dechert, talks with our host Nina Xiang about the new changes in hedge fund regulation in China, why it is important for foreign investors...

 William Shen: Headland Capital Is Bullish On Chinese 4S Auto Dealerships | File Type: audio/mpeg | Duration: 30:50

In this episode of China Money Podcast, guest William Shen, senior partner and head of Greater China at Headland Capital Partners, talks with our host Nina Xiang, about why he sees 4S automotive dealerships in China as the next great opportunity, how Chinese consumers are changing, and what the impact of the economic slowdown has on Headland's investments. Listen to the full interview in the audio podcast, watch an abbreviated video version or read an excerpt below. Be sure to subscribe to the podcast in the iTunes store. Q: Can you give us a brief introduction of Headland Capital? A: Headland Capital was established in 1988. For the past 25 years, we have invested an aggregate of $2.7 billion into around 150 companies based in Greater China, South Korea and Southeast Asia. Our main focus is either providing growth capital for high growth companies or helping companies perform buyouts. We were part of the HSBC Group and did a spin out in 2010. Q: Headland has invested heavily in the Chinese consumer sector. How has the economic slowdown impacted the companies you've invested in? A: The Chinese consumers are still consuming. We are still talking about double-digit annual growth in retail sales. But there are far more choices today than five years ago. If someone's total budget for clothing, for example, has increased 40% or 50% than five years ago, the amount of choices may have doubled or tripled during the same time. Therefore, as a brand, maintaining their market share becomes more challenging. For example, in the apparel industry, the old model of operation is to use a good brand sponsor, advertise on TV and sell your products via a wholesale model. You, as the brand owner, do not operate the retail outlets. You rely on a few thousand wholesale distributors across China to sell your products. In the old days, when choices were few, this model worked for well-managed brands. But with the influx of fast fashion and foreign brands, consumers are becoming far more discerning. So without decent control at the retail level, you wouldn't know which design is selling faster or slower, and inevitably there will be inventory buildup. So in order to do well in the apparel industry, you need to operate your own stores or work very closely with selected distributors today. .......

 Philip Tye: Hong Kong's Role As Asian Hedge Fund Center Will Strengthen | File Type: audio/mpeg | Duration: 24:19

In this episode of China Money Podcast, guest Philip Tye, chairman of the Hong Kong National Group of The Alternative Investment Management Association (AIMA), talks with our host Nina Xiang about what the Hong Kong government is doing to retain and at...

 Capital Account Easing May Lead To Chinese Overseas Buying Spree | File Type: audio/mpeg | Duration: 26:32

In this episode of China Money Podcast, host Nina Xiang does a news roundup and answers questions about China's capital control measures, potential capital outflows from China and its impact on Chinese and global financial markets. China Money PodcastPlease listen to the podcast here and be sure to subscribe to us in the iTunes store.

 China Money Podcast News Roundup | File Type: audio/mpeg | Duration: 24:51

In this episode of China Money Podcast, host Nina Xiang does a news roundup for the week of August 26 to 30, 2013. She shares the news on the economy, China's business sectors, investment fund news and some expert columns. Please listen to the podcast here and be sure to subscribe to us in the iTunes store.

 Chien Lee: Macau's Gaming Sector Will Continue Double Digit Growth | File Type: audio/mpeg | Duration: 28:50

In this episode of China Money Podcast, guest Chien Lee, founder and chairman of NewCity Capital, brings you inside the mysterious VIP rooms in Macau's casinos; explains how much you need to get a seat at the table; shows how the money flows from the casinos to the VIP room promoters, to the agents, and then to the players; discusses Macau's future scenarios; and reveals the latest with 7 Days Group after its privatization deal. Read an excerpt below, but be sure to listen and subscribe to the podcast for the full interview. Q:Lately, Chinese authorities started scrutinizing foreign companies operating in China, from drug makers, baby formula producers to car companies. What do you think the Chinese government is trying to achieve, and what does it mean for foreign companies operating in China? A: Every country has rules and regulations that need to be enforced. The Chinese government is just exercising normal procedures (to protect consumers). I'm in the hotel business. If there are any safety issues at our hotel (7 Days Inn), the government will shut me down. They will do the same for a foreign-owned hotel. I think China is only going to become more open and transparent in the future. Q: In 2012, Macau's casino gaming revenue hit a record $38 billion, that's up 13.5% year on year, and higher than the entire US commercial casino industry's revenue in 2011, which is $33.5 billion. Can you give us some historical perspective on how the gaming industry in Macau evolved? A: Macau is the biggest gaming city in the world. It's six times bigger than Las Vegas. Over 10 years ago, when Macau was handed over to China, the Chinese and Macau governments put in great policies to support Macau's growth. Back then, there was only one gaming license. Now, there are six gaming licenses. The Macau government opened the door to let international casino brands to enter Macau to create more competition. On the other hand, the Chinese government loosened (visa requirements) city by city, to let mainland citizens visit Macau. The Macau government has also implemented policies to make Macau not only a gaming destination, but also a great place to vacation with the family. I've seen more and more families in Macau over the past few years. They enjoy shopping, they go out to dinner, watch great shows like Circe de Soleil, Water Dance and other famous concerts. Q: More Casinos are still being built in Macau. Las Vegas Sands is hoping for another resort. Wynn Resorts are beginning to build another $4 billion resort. MGM Resorts was given permission for a $2.5 billion project. How big will this industry grow? A: Yes, the gaming industry in Macau is still growing very quickly. Billions of dollars are being spent to build more casinos. And, the government is doing lots more to strengthen Macau's infrastructure. A bridge is being built between Hong Kong, Macau and Zhuhai. Macau airport is under expansion. The cross-border facilities between Macau and Zhuhai are expanded already. The light rail transit system in Macau is being constructed. Another smart policy is the development of Hengqin Island. It will connect Zhuhai and Macau together. The University of Macau will build a new campus on Hengqin Island. Guangzhou Chime-Long is building a marine theme park there also. Phase I is going to open this year. My personal estimate is that the theme park alone will bring 10 to 15 million visitors a year to Hengqin, which is next to Macau. Because of the strong growth in China and the region, I think Macau's gaming industry will have on average double-digit growth for the next five to ten years........

 Marc Faber: I Won't Rush Into Buying Stocks Right Now | File Type: audio/mpeg | Duration: 23:53

In this episode of China Money Podcast, our guest is Marc Faber, publisher of the Gloom Boom & Doom Report newsletter and director of Marc Faber Ltd, an investment advisor and fund manager. Faber talks with our host, Nina Xiang, about China's credit situation, why he's bullish on individual mining company stocks and the reason behind his aversion to investing in private equity or hedge funds. Listen to the full interview in the audio podcast, or read an excerpt below. Q: China's July economic data was released and seemed to suggest stabilizing activities. What's your read of the Chinese economy right now? A: My read is that the Chinese economy has decelerated substantially. We cannot trust official statistics. I'd rather believe the Chinese economy is growing at 4%, not the 7.8% that the government claims. Trade data from other Asian economies suggest that Chinese exports were much lower. China's growth has been slower and of relatively lower quality. I think it's going to decelerate further. There will be some speed bumps ahead that could be quite painful. Q: The Energy Information Administration said that China would surpass the U.S. to become the world's biggest net oil importer this October. What are the implications for the oil industry? A: We have declining oil demand in the developed economies in the West and in Japan. There is flat demand in economies such as South Korea and Taiwan. Oil consumption in the Middle East, India, China and other emerging economies are rapidly growing. China has four times more people than the U.S., and it's natural that it will become a bigger net oil importer. This means that oil prices are unlikely to collapse. Some analysts say that oil price will collapse to $40 or $50 a barrel. I don't think it's going to happen because the underlying demand is relatively strong. The other implication is that China and other Asian countries are heavily dependent on oil from the Middle East. Securing that supply is obviously a top priority for China. That could lead to geopolitical tensions in Asia between China on the one hand, and Japan, the Philippines, Taiwan and Vietnam, countries supported by the U.S. on the other hand. The tension could increase in due course and have an impact on asset prices. Q: Does it excite you that Tesla Motors is reporting better than expected revenue and profits? A: Usage of oil in cars may decline somewhat at some point. But there are many hurdles for electric cars for the foreseeable future. I can't really see how people in Northern Thailand here can use battery-driven cars. It may happen one day, but will take a long time. Even if electric cars are introduced more broadly, it is such a small percentage of energy consumption that it won't have an impact. Also, we have to determine how much energy is required to produce those batteries. Q: You've said that there had been a huge credit bubble in China, and it's not going to end well. How do you envision that ugly end? A: We have excessive debt everywhere in the world. The problem is that even if the Chinese government can gradually write off, cover up those bad loans, or put them into a government-sponsored fund, the kind of credit-led growth will be much slower going forward. Credit growth over the last three or four years in China has been faster than other economies prior to their financial problem or crisis. There could be a financial crisis but the government might be able to postpone it. But postponing the problem does not mean solving the problem. Q: Would you say that the kind of money printing we see right now is greater than anything you've seen in the past? A: In the past, there were some countries that increased their money supply at a faster pace than the present time, such as Latin American countries in the 1980s, Germany between 1919 and 1923, both had hyperinflation; in Eastern European countries after the fall of the Berlin Wall in 1989. However,

 Arthur Kroeber: Credit Curbs And Structural Reforms Will Heighten China Risk | File Type: audio/mpeg | Duration: 27:39

In this episode of China Money Podcast, guest Arthur Kroeber, founding partner of GK Dragonomics, talks with our host Nina Xiang, about why he's less optimistic about china's growth in the next couple of years, how the alarmist headlines about capital outflows from china is overdone, and why the 7% number that everyone believes to be the minimum rate required to provide sufficient employment for China's labor force is total non-sense. Listen to the full interview in the audio podcast, watch an abbreviated video version or read an excerpt below. Q: Lately, there have been some media stories on capital outflows, or even capital flight, out of China. How concerned are you about this possibility? A: I'm not terribly concerned for two reasons. One is that the Chinese government still maintains significant capital control measures. There have been some talks that the government will eliminate these controls in the next few years, but I think it's unlikely. The broader point is that China has been used to having one-way capital flows for a long time. Everybody wanted to get their money into China, no one wanted to take it out. Many people thought it's a big problem for the world that China was like a Hotel California for capital: You could check in, but you could never check out. But now we are seeing capital flows in both ways, and with various volumes. Foreign reserve accumulation slowed down dramatically. Lately, we saw some net capital outflows. But this is part of the normal process of the economy adjusting from rapid economic growth on intensive investments to a slower one that's more consumer-driven. Q: What are the specific capital control measures in place right now? A: It's very difficult for Chinese institutions and individuals to move money out of China. Any outflow is regulated under the qualified domestic institutional investor program (QDII) and limited by an annual quota. For individuals, it's close to impossible to move large amount of money offshore. Chinese companies have been going out to do mergers and acquisitions or greenfield investment overseas. The outward foreign direct investment now run somewhere between $50 billion to $80 billion a year. These are regular capital outflows for every economy. The only concern is if people lose confidence in the economy and everyone takes his or her money out. But that's a very remote possibility. Arthur Kroeber is founding partner of Beijing-based research boutique firm Dragonomics since 2002. The firm was acquired in 2007 by Hong Kong-based research company GaveKal. Kroeber now manages GaveKal Dragonomics' research efforts in China and globally. Previously, he was a journalist covering economic affairs in Asia. He is also a fellow of the Brookings-Tsinghua Center in Beijing.


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