BBC is carrying a story for no apparent reason about the upgrading and expansion of railways in Southeast Asia. What caught this Bystander’s eye was how many of the proposed and improved lines radiate from China.
One is a line from Guangzhou to Hanoi being funded by the Asian Development Bank and France. Another is a rail link from Kunming, which is already two thirds built on the Chinese side, according to the BBC. Both would be substantial upgrades to the existing line on the Vietnamese side, which is mostly single track, with some of it three rail to accommodate the Chinese and narrower Vietnamese gauges.
Those two lines would eventually be extended south from Hanoi to Ho Chi Minh City, upgrading the ancient but spectacular track now there and creaking under the passenger and freight loads it carries.
China is funding feasibility studies for a railway between Hanoi and the Cambodian capital, Phnom Penh, which would pass through Vietnam’s mining region. From there the line would continue to the ports in Thailand and onto those of Singapore.
Other potential routes, according to the BBC report, could be from southern China through Laos along the route of the Mekong river to either the Gulf of Thailand or the South China Sea, and from southern China through Burma to the Bay of Bengal. Both those last two, though, would have more than engineering problems to overcome.
Real estate market slump or no, construction has started on what will become China’s tallest building when it is completed in 2014.
The 632-meter Shanghai Center in the city’s Lujiazui financial center will tower over the Jin Mao Tower and the newly opened Shanghai World Financial Center by 212 meters and 140 meters respectively. Those are already two of the world’s five tallest buildings. When built, the new skyscraper will be the world’s second tallest building after Burj Dubai, now under construction in the United Arab Emirates.
The Shanghai Center is being built on a circular foundation and will have a striking twisting, asymmetrical shape containing offices, a luxury hotel, shops and restaurants. Xinhua has a photo of the foundations. Estimated price tag 15 billion yuan ($2.2 billion). The developers can only hope Shanghai’s commercial real estate rents recover by the time the center is ready to open.
The mystery surrounding Huang Guangyu, founder and chairman of retail chain Gome Electrical Appliances (see “Gome’s Huang MIA“), has taken a further twist.
The day after Beijing police confirmed that Huang, 39 and China’s second richest man, was under investigation for unspecified economic crimes, the company said its chief financial officer, Zhou Yafei, was also being investigated, but that the company itself has no involvement in the investigation (announcement to Hong Kong Stock Exchange, pdf).
Gome has appointed its chief executive Chen Xiao as acting chairman and Fang Wei acting chief financial officer. Gome also said that preliminary internal checks had not revealed any misappropriation of the assets and funds of the group.
The police and company statements are the first official word on Huang’s whereabouts since the Beijing based business magazine Caijing first said last week that the entrepreneur had been detained on suspicion of manipulating the share price of a company in which his older brother owns a substantial stake.
Gome is likely to continue to distance itself from its founder chairman. Little good usually comes to companies whose patriachs fall foul of official investigations for fraud or corruption.
Red flag on the economy raised by Zhang Ping, chairman of the National Development and Reform Commission: economic indicators for November are showing an accelerating rate of slowdown in growth. Zhang was speaking at a press conference following the announcement of the 108 basis points cut in interest rates. “The crisis is spreading all over the world and its impact on China’s economy is deepening,” he added.
Zhang also said that the 4 trillion yuan stimulus package announced earlier this month should add one percentage point to China’s growth rate, a more conservative estimate than that of many private economists.
China’s newly announced cut in interest rates, to 5.58% from 6.66% for the central bank’s one-year benchmark rate, to take effect on Thursday, is the fourth cut since mid-September and biggest since the Asian financial crisis in 1997. The People’s Bank of China has also lowered the reserve requirements it imposes on banks, by 1% point for big banks and 2% points for smaller banks.
None of this is a surprise, though the size of the rate cut has been to some. That in itself is another signal that the economy is slowing faster than desired, and how seriously Beijing is taking remedying that.
Filed under Economy, Markets
A concrete infrastructure spending proposal: 120 billion yuan to build a 1,900 kilometer passenger rail line to from Gansu to Xinjiang, Xinhua repots. The new line will run parallel to the existing Lanxin railway, which will be turned over to freight exclusively, easing a bottleneck to the transport of Xinjiang’s oil, coal and cotton to the rest of China.
At present the Lanxin railway is the only line connecting the far west with the rest of China, running from Lanzhou to Urumqi and then on to the Kazakhstan border, following in part the path of the old Silk Road. Work on the new line will start next year, thought there is no indication of how long it will take. Xinhua also says that 100 billion yuan will be spent on improving roads in the region over the next five years.
A rare piece of good news for China’s beleaguered steelmakers: BHP Billiton is walking away from its bid for Rio Tinto. Aluminum Corp. of China, Chinalco and other Chinese steelmakers were among the most outspoken about fears that the combination of two of the largest natural resources companies would have too much control over iron ore prices. As we noted in Chinalco Gets Australia’s Limited Nod For Rio Tinto Stake, the Chinese steelmaker went as far as taking a stake in Rio Tinto to ensure it would have a place at the negotiating table.
BHP said the reason for dropping the bid was that asset sales that anti-trust regulators in Europe would likely require would have to be done at fire-sale prices and that financing would have been difficult to secure in the current global financial crisis. Further, servicing the high level of debt that would have been involved would have been risky at a time of tight credit and diminished cash flows following the collapse in world commodity prices.
One sign of the impact of the crisis on the all-share bid is that its value had fallen from $140 billion when it was made a year ago to $66 billion now.
What has happened to Huang Guangyu, chairman and founder of retailer Gome Electrical Appliances, China’s second-richest man and no stranger to financial scandal?
The company issued a statement (.pdf) to the Hong Kong Stock Exchange today saying in effect that it hadn’t a clue. Gome suspended trading in its shares before the market opened.
Huang, 39, who had a fortune of $2.7 billion in October, down from 3.5 billion in March according to Forbes, hasn’t been heard of since last Wednesday. He was questioned last week by police in Beijing over stock manipulation in Shandong Jintai, a drugmaker company controlled by his brother Huang Junqin. Or at least so says the Beijing-based financial magazine Caijing, which has a track record for breaking news based on tips from well-placed Beijing sources. A report in Hong Kong’s Ming Pao also talks of allegations of money laundering and tax evasion. Trading in the shares of Shandong Jintai were suspended on the Shanghai exchange at the weekend.
Last year Eagle Property, which is indirectly controlled by the Huangs was subject of an investigation into whether it had got an illegal 1.3 billion yuan ($190 million) loan from Bank of China in the 1990s. Both brothers were cleared. Gome, which has 200 stores across China, was itself subject of a tax audit earlier this year to see if it had avoided paying value added taxes, but the company says it was a routine audit that uncovered nothing unusual.
It is not always glorious to be very rich. The authorities launch periodic investigations into rich entrepreneurs over tax evasion. The early financing of many of these fortunes is would have been swirled in the mists of history, so to speak. Xinhua says Huang’s case is under the direct charge of the Ministry of Public Security, which suggests that there are some influential bodies buried somewhere in all this — whatever this is.
The muddied details of China’s 4 trillion yuan stimulus measures announced earlier this month became no clearer with reports by state broadcaster CCTV that projects planned by provincial governments will add 10 trillion yuan to the pot. Among stimulus measures announced in the past week, CCTV said, were 3 trillion yuan to be spent by Yunnan and 2.3 trillion by Guangdong, the money earmarked for infrastructure.
As with central government’s proposed spending plans, it is difficult to distinguish between already budgeted and new monies, and there is little detail on specific new projects. Much of this 10 trillion yuan may be for wish-list projects, see below, that will never see the light of day. Throwing around big headline numbers seems to be part of a propaganda drive to encourage domestic consumption and bolster confidence as economic growth slows.
Another report on CCTV may throw some light on the big numbers being thrown around by the provinces. The broadcaster interviewed Qiu Yunyang, chief of the Development and Reform Bureau of Hubei’s Zaoyang City, about Beijing’s plan to spend 100 billion yuan of its stimulus package in the fourth quarter.
“That means an upcoming investment boom. but it’s not easy to secure central finance. Only those who have a good reserve of projects will have a better chance,” Qiu said.
Qiu said he and his colleagues have been putting in extra hours to find a long list of suitable projects to get a slice of the newly available pie. They’ve already found a 100. CCTV goes on to list province after province where officials are doing exactly the same. Doesn’t take long to get to 10 trillion yuan that way, even if much of it is pie-in-the-sky.