China's Inefficient Use of Investments

choi

There is no need to read either report.

(1) Chris Bryant and Ed Crooks, Industrials Feel China Squeeze; Western groups hit by drop in Chinese orders; Siemens, Eaton and 3M cautious on sales. Financial Times, Jan 30, 2012.

Quote:

"Western industrial companies have seen a slowdown in some markets in China as efforts to cool the world's second largest economy have hit demand for capital goods and products linked to construction.

China was until recently a source of rapid growth * * * Last Week, however, bellwether groups such as Siemens, 3M and Eaton were among those that expressed caution on Chinese sales, joining others including Volvo and ABB that had warned about cooling demand at the end of last year.

Siemens "reported a 16 per cent fall in new Chinese orders in  its fiscal first quarter, [and] said there had been a /marked slowdown in short-cycle business,' particularly in industrial automation.

3M "said: 'Our China anticipate continued below-trend growth in the first half of 2012.'

""However, not allwestern companies selling in China have suffered from slowing demand. Honeywell, which makes aircraft parts and controls, said on Friday [Jan 27] that its sales in China were up 18 oer cent in 2011.

"Consumer-orientated businesses are also still enjoying a boost from robust retail demand, as attested by booming Chinese sales of Apple's iPhone.

"Also affected are companies selling products that are ordered, paid for and delivered quickly, such as industrial automation equipment.

"Overcapacity in China's steel, wind or shipbuilding industries as well as slowing infrastructure spending are also erodingindustrial volumes and margins.

"Ellen Kullman, the chief executive [of Dupont] said a slowdown [of chemicals sale] from 9 per cent to 8 per cent growth in China was 'still pretty goods if you look around the world.'

My comment:
(a) industrial (n): "a company engaged in industrial production or service"
www.m-w.com
(b) Eaton Corporation
http://en.wikipedia.org/wiki/Eaton_Corporation
(founded in 1911 by Joseph O Eaton, brother-in-law Henning O. Taube and Viggo V. Torbensen; Headquarters Cleveland, Ohio)
(c) For Siemens, 1Q FY 2012 is 4Q11 (the last three months of 2011).


(2) Dinny McMahon, Forget Stocks--Chinese Turn Bullish on Booze and Caterpillar Fungus; Investors chase returns in strange places; A wild ride in 'Roaring Yellow River.' Wall Street Journal, Jan 30, 2012.

Summary: "With Chinese stock falling, real-estate markets flat and bank deposits ofeering measly returns, Chinese investors" speculate in strtange places:
(a) "fungus harvested from dead caterpillars, known in some quarters these days as Himalayan Viagra. * * *  The fungus has doubled in price over the past two years and the top grade now fetches $11,500 a pound"
(b) "New fangled exchanges are spouting across Chins to take advantage of the excitement. [For example, exchanges] for trading traditional medicines such as deer antler * * * Exchanges have popped up that allow investors to buy and sell shares of individual works of arts. Inthe city of Tianjin last summer, an unnamed seller floated about 30 million shares of a painting called 'Eternal Lotus Wind,' at an initial price of 161 yuan a piece--about 25 cents. Within two days, investors had bid the shares up 52%, valuing the painting at about $11.5 million. Then the shares began sliding; they now trade at 36% below the initial public offering. Cui Ruzhuo, who painted 'Eternal Lotus Wind' but didn't profit from the offering, says the market still has legs.
(c) Maotai "now sells for more than $300 a bottle, double the price a year ago.
(d) "At the December auction, a businessman from Jiangsu province dropped $8,300 on two dozen bottles pf liquor [Shanxi Fenjiu] of uncertain vintage--their water-stained cardboard packaging suggested rgey were old--almost four times the starting price onthe auction docket. 'If I held these for a while, I could definitely make some money,' said the buyer, who didn't provide his full name.
(e) Industrial & Commercial Bank of China, Inc set up a fund for customers to invest in high-end Pu'er tea, marketing it as a low-risk investment. China Merchants Bank Co is planning to allow some customers to trade diamonds through its website.
(f) Auction house [Beijing] Googut [Auction Co] helped three banks set up bank-run investment funds for customers to invest in baijiu and other liquors. Mr Liu [Xiaowei], Googut's chairman, said the funds are eyeing an annul return of about 20%.
(g) "Some of the biggest boom-and busts have taken place art art exchanges. 'Roarin Yellow River,' a traditional landscape painting by the late artist Bai Gengyan, was the first work listed by the Tianjin Cultural Artwork Exchange. Within two months of the offering, shares were trading at nearly $3 each, up from 15 cents, valuing the painting at about $18 million. The previous auction high for the artist's work was a bit more than $600,000. * * * Shares of 'Roaring Yellow River' now trade at about 20 cents, down more than 90% from their peak.
(h) Potential items of speculation are watches and white jades.