The Big Call
Though investment in plants and machinery by private companies is slowing from last year’s heady growth rates, it is set to remain fairly resilient to China’s broader slowdown, China Confidential research shows.
Shoe companies are slugging it out in China’s fashionable footwear market by building brand equity, managing costs and enlisting the pulling power of TV dating shows.
Daphne’s mass-market, lower-tier positioning has driven strong sales and profit growth, but mounting competition and rising costs are likely to squeeze profits and margins this year.
Tapping into faster-growing market segments should help Belle to cement its position as China’s leading female fashion shoemaker.
Aggressive expansion and soaring inventories eroded net profit in 2011, but a renewed focus on efficiency should help to turn around performance in 2012.
A diversified approach has enabled the mid-to-premium shoemaker to expand aggressively without sacrificing margins.
The China Confidential Rural Wealth Index (CCRWI), which measures key aspects of rural economic activity to ascertain the pace of wealth creation, slipped to 53.0 in March from 56.3 in February due to declining pork prices and slowing rural vehicle sales.
An extraordinary jump in maize imports so far this year – as evidenced by the 494% YoY rise in February – was driven by state buying to boost depleted inventories, relatively low international prices, mould outbreaks in some areas and longer-term shifts in farming practices and diets. Industry participants and analysts said they expect continued strong imports this year but a moderation later in the year.
Tight liquidity enabled banks to enjoy sizeable increases in fee income in 2011, but looser conditions in 2012 mean that fee income is unlikely to be a prominent revenue driver for banks this year.
A selection of key financial data for April.
Capital Intensive China
New housing starts in 1Q12 posted their first YoY drop in three years, but state developers are using their inherent advantages to weather a trying phase in the real estate market.
Best of Chinese Commentators
China’s drug regulator halted sales of 13 drugs on April 15 that use capsules allegedly made from industrial gelatin that contains excessive levels of toxic metal chromium, a potential cause of cancer. The 13 drugs under suspension were all made by Chinese pharmaceutical companies that buy plastic drug capsules produced by small manufacturers in China’s eastern Zhejiang province. The drug regulator also asked local authorities to carry out inspections of local capsule manufacturers. So far, police have reportedly detained 22 people who allegedly produced and sold the capsules.
In late March, the State Council appointed Wenzhou, an underground lending hub in Zhejiang province, as a pilot zone for financial reform. The reforms will include encouraging the establishment of rural banks by private capital, designing offshore investment schemes for individuals, setting up regulatory rules for private lending activities, and developing a bond market for local small and medium businesses. Experts have been debating whether the reforms will finally break state-owned banks’ monopoly over financial services in China.
Renminbi Compass reflects key changes in the renminbi-denominated investment environment.
Providing research coverage on asset classes as diverse as chengtou bonds, dim sum bonds, real estate, trust products, underground banking, art and antiques, as well as its traditional equity fund research.
Renminbi Compass provides orientation for investors navigating the expanding universe of renminbi asset classes.