I. The News from China
On the one hand...
"Industrial production continued to speed up. In August, the total value added of the industrial enterprises above designated sized was up 12.3 percent year on year or...
On the other hand...
0.5 percentage points lower than that in August 2008, or....
Back of the hand...
1.5 percentage points higher than that in July 2009; it was the fourth consecutive month which witnessed an acceleration of year-on-year growth. In the first eight months of this year, it was up 8.1 percent year-on-year, which....
While on the back of the other hand...
was down 7.6 percentage point over that in the same period last year, or...
On the one hand...
0.6 percentage points higher than that in the first seven months in 2009."
--Li Xiaochao
Spokesman
National Bureau of Statistic of China
"China's Major Economic Indicators in August"
And on the one hand...
"Investment in primary industry, secondary industry, and the tertiary industry went up by 60.4 percent, 27.0 percent, and 37.3 percent respectively."
On the other hand...
"Industrial profit in 22 regions realized 1,110.7 billion yuan from January to July, declined 17.3 percent year on year"
On the one hand...
"[profit decline] narrowed 3.8 percentage point over the first half of the year..."
On that same hand...
The profits of 14 industrial sectors increased within 39 sectors of the industrial sectors...
On the other hand...
the decreasing rate [of profit declines] of nine industrial sectors narrowed over the first half of the year, and...
On the one hand...
the profits of 4 industrial sectors increased
--Chinese Bureau of Statistics
"Industrial Profits Kept Dipping from January to July"
Two hands...
(Sector) General Purpose Machinery (Profit change) +3.9% (Fixed Asset Change) +43.1%
Steel -77.3%, +10.8%
Non-ferrous metals -63.9%, +21.7%
Electronics -43.5%, +4.7%
Transportation Equipment +4.7%, +35.2%
No Hands....
In August, the Aluminum Company of China, Chinalco reported a net loss for the first half 2009 of 3.52 billion yuan and reduced output by 32 percent.
On the one hand...
Between 2004 and 2006, high yield debt in Pacific Asia, including China, grew 53 percent.
On the other hand...
Time for a haircut. Foreign holders of the high yield debt of Asia Aluminum Holdings, a China based, an insolvent, aluminum fabrication enterprise received 1% of the face value of their holdings.
Resolution of the FerroChina corporate bankruptcy provided zero percent renumeration to offshore foreign holders of the company's 4130 million in bond, while other foreign holders received 60 cents on the dollar.
While on the other hand...
CIC-- China's sovereign wealth fund-- joined with Qatar, Simon Glick, and Morgan Stanley in a syndicated equity purchase of 800 million pounds in the nearly bankrupt London based prime manager of nearly empty Canary Wharf, Songbird Estates.
On the one hand....
The major portion of profits earned in China by US and European banks in China comes from establishing, and acting as a counterparty for, derivative contracts with large state-owned companies. In 2008, derivative contracts on the movement of the Australian dollar cost Citic Pacific almost $2 billion. Fuel hedge contracts entered into by China Eastern Airlines, Air China, and China Ocean with Deutsche Bank, Goldman Sachs, JP Morgan Chase and Citigroup cost the transport companies more than $1 billion when the price of oil collapsed in 2008-2009.
Biting the one hand...
China's Asset Supervision and Administration Commission of the State Council declared its support for the efforts of Chinese companies to have the loss-making derivative contracts declared null and void.
On the one hand...
Bank of China announced it will launch a fund to invest in hedge funds-- a "fund of funds."
While on the other hand...
Estimates are that almost two thousand hedge funds have closed in 18 months while the market values of assets held by the "funds of funds" have declined by 40 percent.
Feeding the hand that bites you...
China Investment Corporation, China's sovereign wealth fund, has agreed to invest $1 billion with Oaktree Capital Management LP of the United States. Oaktree Capital specializes in "vulture investing," accumulating "distressed" debt securities of companies in, or close to, insolvency. CIC already has stakes in "funds of funds" operated by Blackstone Group LP and Morgan Stanley. CIC is expected to invest another $2 billion with hedge funds.
In both hands...
Accumulation and decomposition.
In one word...
Overproduction. Overproduction is always the overproduction of capital.
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