Reuters has a feature story from Spain about money laundering suspects arrested in 2012. The striking thing about the story is the scale of the smuggling of ordinary manufactured goods from China into Spain. The smuggling was large enough that a money laundering ring could dictate which national retailers could get certain categories of goods and which could not. There was — and presumably still is — enough smuggling to keep banks busy in four countries. If similar tax evasion schemes are operating in other countries, then they are large enough that they would have to be an integral part of economic planning for exports from manufacturing countries.
Thursday, August 3, 2017
Monday, July 31, 2017
Wednesday, July 5, 2017
The bizarre-looking elevated bus project is dead. it was canceled weeks ago and city workers in Qunhuandao have removed most of the test tracks that the bus tried to run on. In canceling the project regulators said the bus never really worked, despite some almost-convincing video, and the idle prototype was causing traffic jams as drivers were forced to go around it. Now regulators are saying that the entire project and the crowdfunding platform that funded much of it might have been a scam. Huaying Kailai, a peer-to-peer lending company, was run by the same executive who was running the bus company. The lending company now appears to be out of business. The executive has been questioned by investigators, and law enforcement officials are asking investors to come forward with documents. (Story at CNNtech: http://cnnmon.ie/2sIDzSp)
Sunday, June 25, 2017
Regulations meant to limit the reach of the shadow banking sector are having their biggest impact on the banks in China. I think no one quite understood the extent to which banks were making off-balance sheet loans through shell companies and mysterious investment funds to avoid scrutiny of those loans. A series of new rules make shadow loans much more difficult for banks to do. Some of the shadow loans have moved onto the balance sheets now, painting a less rosy picture of banks’ financial results. Some have moved out of the banking sector entirely.
The shadow banking sector is more than just banks getting around the rules, though. Real estate developers also seem to be steering clear of shadow-bank financing for now, worried about what might happen if authorities catch up with them. In other areas such as investing and trade, though, there are few signs that the stricter rules are reining in shadow-bank loans as intended.
Monday, June 19, 2017
Peak pork? I guess we can call it that. Reuters reports that consumer demand for pork in China is down for the third year in a row, despite falling prices. [ http://www.reuters.com/article/us-china-meat-demand-insight-idUSKBN19A31C ] China consumes so much more meat than any other country that if pork is passé there, it must be declining globally. It is not that pork dumplings are disappearing, but manufacturers are mixing in more vegetables to appeal to increasingly health-conscious consumers. For the first time in China, large numbers of people are trying to eat less in general in order to be more healthy.
Pork producers in China could take losses on recent investments in plants and equipment, but it is foreign suppliers that hoped to sell into the Chinese pork market that will have to make the biggest adjustment. The decline in pork runs counter to official forecasts, much like the soft demand for dairy products in Europe and North America. It seems to have caught everyone by surprise, but it is just the latest example of a decline in quantity for manufactured products.
Tuesday, May 30, 2017
A country can’t continue to spend its reserves indefinitely without facing the financial consequences, and China last week got a credit downgrade that by most accounts was long overdue. This raises the cost of borrowing overseas — hardly an issue for the Chinese government itself, but it may prompt banks and shadow banks to do more of their borrowing within China. That is a good thing in some ways, but it makes the Chinese financial system more top-heavy than it was already, increasing the risk of a rapid collapse after any of various kinds of failures that might occur in the future.