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13-08-2016, 11:59 AM
(11-08-2016, 11:15 AM)CY09 Wrote: Behappy posted quite a few good articles about China in another post which is reflective of China's plight imo. I am in the camp that China is indeed in a very bad debt bubble and am curious to see how much haircuts banks/financial lenders will have to take.
Basically, a lot of corporate debts in China are as good as gone due to overcapacity in steel/coal/shipbuilding/unsold properties and many companies are unable to repay the principal. Some province govt have resorted to forcing the lenders to take haircuts. With YZJ having so much financial assets, it is important for us to relook into its type of investments. For YZJ, impairment of financial assets is a definite scenario.
"Participation in consolidation of traditional industries and restructuring of state-owned enterprises" is equivalent to national service in China.
Consolidation of traditional industries is the supply-side reform that Xi has been pushing since May 2016 after the person of authority's article. It has been ongoing at quite a fast pace in China with a number of companies closed down. The 276 days production limit has also pushed up coal prices and import in China. Coincidentally, the fund was set up in late Jun 2016.
Restructuring of SOEs is likely to be debt to equity swap and restructuring of the dying non-central government-owned SOEs. It is also very difficult to buy a SOE for less than 1x PB in China, so any restructuring done by YZJ is unlikely to be the kind that the AMC is able to do. The restructuring for the better SOEs will be in the form of consolidation and M&A to make them bigger and stronger, unlikely the task that YZJ as a private company will do.
It is a fair trade-off since YZJ benefitted from the shipbuilding subsidies provided by the Chinese government for ship-owners to order new ships in China. The 30 Valemax orders are likely to be a concession by Vale in return for the approval to dock the valemax at Chinese's ports. That's how the PRC govt has been supporting the shipyards, which employs significant workforce. Order cancellation in the industry is high with 52% delivery slippage for dry bulk in 1H16 and many of these are from the Chinese yards.
http://www.businesstimes.com.sg/companie...nt-vehicle
"JNIHCO chief executive Hu Yin said in the release that the newly set-up investment holding company will anchor on four business platforms: building up an integrated financial services network; participating in consolidation of traditional industries and restructuring of state-owned enterprises; providing institutions and individuals with asset and wealth enhancement services; and facilitating international mergers and acquisitions."