Kung Fu Fighting

link to italian version As you might have seen, I’ve been increasingly focusing my attention on Asia and China in particular for the last few weeks. The reason for this focus – apart from the natural attraction towards the things I don’t know much – is that convergent hints are channeling my attention for the Asian giant.

First, macroeconomic data: in 2012 Chinese GDP scored +7.8% (the lowest growth pace in the last 13 years) against + 9.3% in 2011 and 10.4% in 2010. A steady decrease of growth rate, clearly reverberated on the financial markets – the Shanghai stock exchange has recorded in the last three years performances which are worse than the Athens S.E. ones. However, the GDP growth rate has experienced a re-acceleration in the last quarter of 2011 (+7.9% YoY, after the +7.4% of the previous quarter). And here we are with the first “red flag”.

Then, the political moment. The CCP is having its top positions renewed, and the new management (as I like to call it) of the Country is saying it loud: the People Bank of China has to support aggressively the growth of the national economy. In particular, it’s getting clearer and clearer that the desired growth is the monetary one, boosted giving room to financial leveraging and trying to push the banking sector forward. And here we are with the second and third “red flags”.

Today, we read that the Chinese Industry and Technologic Information Ministry has decided to come into action – expressly asking for an acceleration in the consolidation process of a dozen of industrial sectors, such as steel, technology and shipbuilding industries.

The target is the increase of industrial concentration levels for a wide range of the most important productions, including car, building, logistics-shipping, aluminum, rare earths, medicine and agricultural industries. Consolidation levels in these areas can stunningly develop – companies are small and fragmented, with low specialization levels and “overproduction issues” (citing the Ministry’s speech). The goals to achieve are:

  • for the steel industry, 10 top players with the 60% or steel world production within 2015 – when it will be time to create 3-5 companies able to compete on the world stage
  • for the information technologies industry, in 2 years, 5-8 top players with a yearly turnaround amounting to CNY100bn
  • for the aluminum industry, within 2015, 10 top players to cover 90% of the sector production
  • for the shipbuilding industry, the 10 top ship-owners must cover at least 70% of the total production. Guess the deadline…
  • for the car industry, within 2015 the 10 top companies will account for 90% of the total production.

Is it now time for a (rich) M&A season, fed by the financial leveraging and the Central Bank credit, after a season of steady losses on the stock markets? Operatively speaking, does it get anything to you? And – well, especially – does it sound familiar?

Related Posts with Thumbnails
Word To PDF    Invia l'articolo in formato PDF   

About bimboalieno

Operatore finanziario professionale dal 1998; ha collaborato con diverse banche italiane ed estere. Si può scoprire dell'altro cliccando qui. Oggi é responsabile di un centro di Private Banking. Professional financial trader since 1998; he has worked with several Italian and foreign banks. You can learn more here. Bimboalieno is currently in charge of a Private Banking centre.