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17 May 2012
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Time to actThe Big Call
Copper financing loses its lustre
A boom in buying copper for use as collateral to back borrowing for credit-starved private businesses is set to unravel, creating a bearish outlook for copper prices
Consumer China
Department stores – shrinking growth, aggressive expansion
With consumer spending slowing and aggressive expansion heightening already stiff competition in many leading cities, 2012 promises to be a challenging year for leading department store chains
Intime – exploiting its home-field advantage
Dominance of its affluent home province of Zhejiang and targeted expansion elsewhere should support further strong top-line growth for department store operator Intime
New World – margin pressure persists despite rebranding efforts
Despite a rebound in sales due to rebranding efforts, margins and earnings remain lacklustre for China’s second-largest department store operator
Lifestyle International – upmarket retailer moving up the coast
The high-end Hong Kong department store group has achieved strong sales at its four mainland stores by tapping its knowledge of upmarket mainland shopping habits
Wangfujing – long-term potential intact despite sluggish 1Q12
Despite posting its weakest quarterly results for five years, department store chain Wangfujing’s strong presence in promising inland regions and multi-store strategy should help to turn performance around
Rural China
Rural wealth creation slows slightly in April
The China Confidential Rural Wealth Index (CCRWI), which measures key aspects of rural economic activity to ascertain the pace of wealth creation, declined slightly to 52.7 in April from 53.0 in March, dragged down by slower growth in migrant worker remittances as well as falling pork prices
The "Me Generation" of migrant workers
Younger migrant workers spend more, are more brand conscious, want to live nearer home and dream of starting their own businesses, a CC grassroots survey finds
Financial China
LGFV default risks continue to moderate
Since late 2011, banks have been quietly rolling over maturing loans to local government financing vehicles (LGFV) in response to recognition from top-level policymakers in Beijing that mass defaults by LGFVs would cause severe shocks to economic growth and disrupt this year’s all-important leadership transition (CC Nov 3 2011, Financial China).
Selected financial charts
A selection of key financial data for May
Capital Intensive China
Investment growth slows as developers shore up balance sheets
Property investment growth slowed to 18.7% YoY in the first four months of 2012, the first time that growth has fallen below 20% in the past three years. Furthermore, a National Bureau of Statistics index of real estate investment declined to 95.62 in April, the lowest level since May 2009. Meanwhile, sales data for April shows that leading developers are aggressively discounting properties to achieve quick sales in order to improve balance sheets and refinance debts that are due to mature
Best of Chinese Commentators
Yangzhou boosts property
On May 7, the government of Yangzhou, a municipality in Jiangsu province, announced that it will reward citizens who purchase fully furnished housing within a year from July 1 with 0.4% to 0.6% of the housing contract price according to the size of the house. The policy was the latest in a series of housing plans issued by local governments to help local real estate. Many such initiatives by local governments have subsequently been blocked by the central government, but Yangzhou has so far escaped sanction and an official at the Ministry of Housing said there will not be any action against the city.
Water quality scare
Around 50% of water in the public water systems across China is unsanitary, China’s media has disclosed, quoting an unpublished survey conducted by the Ministry of Housing and Urban-Rural Development (MHURD) in 2009. Another official MHURD document, meanwhile, disclosed that only 83% of the urban water supply met sanitary standards in 2011. The issue follows health scares in recent years around milk contamination, filthy cooking oil used in restaurants and suspect drug capsules.
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