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China’s Resource Binge: Bubble Building 中国资源并购潮：酝酿泡沫

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Chinese resource firms have embarked on a global buying binge over the last year, paying big premiums for assets to produce commodities like oil and gold on the assumption that high prices will allow them to earn strong profits on their investments. But these billions of dollars in purchases could easily end up worthless if commodities prices return to earth in the next few years – a strong possibility for these highly cyclical industries that looks even more likely as China’s overheated economy heads for its own much-needed correction. Barely a month goes by these days without announcement of a major new purchase or other major initiative by a Chinese resource firm, with last week alone seeing three such deals. In the first, top Chinese aluminum producer Chalco (HKEx: 2600) announced it would offer nearly $1 billion to increase its stake in a Mongolian coal mining project, paying a 28 percent premium for new shares to Canada-listed Ivanhoe Resources (Toronoto: IVN). Just days later, the state-owned parent of PetroChina (HKEx: 857; Shanghai: 601857; NYSE: PTR) announced it was in talks with several major foreign oil companies, including Royal Dutch Shell, for a major project to develop shale oil in the Xinjiang region. (English article) That announcement was the latest in an ongoing series of similar domestic and off-shore deals by China’s largest oil producer as it heeds Beijing’s call to develop more expensive unconventional energy sources. And at the end of the week, Zijin Mining (Hong Kong: 2899; Shanghai: 601899), China’s largest gold miner, announced it would invest $235 million to take a controlling stake in Norton Gold Fields (Sydney: NGF), paying a 46 percent premium for shares of the Australian firm. (English article) All these companies are rushing to take advantage of high commodity prices, including oil that now sells for more than $100 per barrel and gold that continually reaches new highs. But other commodities like aluminum are already showing weakness – testimony to the highly cyclical nature of many of these commodities. The 3 deals announced last week all carry major risk for their buyers, each trying to take advantage of high global prices. Chaclo is not only paying a sizable premium for its Mongolia gamble, but the deal is also taking it into the coal and energy sector where it has little or no experience. Zijin Mining is also paying a big premium for its Australia purchase, again betting that global gold prices will remain high. PetroChina’s broader bid to develop shale oil and gas around the world carriers a high degree of risk as well, as its wide array of initiatives into this costlier energy area could end up uneconomical if oil prices ever fall back to more historical levels. (previous post) An interesting parallel to the current commodities frenzy might be the worldwide real estate bubble of the 1980s, when Japanese firms flush with cash and global aspirations embarked on a massive buying spree. That movement drove property prices to record levels in many markets, including the US, as Japanese buyers snapped up properties throughout the world under the assumption that values could only go higher. Of course, anyone who lived through that period knows the property bubble ultimately burst, bankrupting many Japanese firms and leaving the country’s major banks with huge volumes of bad loans. The current Chinese buying binge has many similar qualities, again involving major companies buying assets at big premiums and in risky areas that could easily become uneconomical if global commodity prices come down. There’s always the possibility that prices have entered a new phase and will remain at their current levels or even rise higher in the years ahead on growing demand from China and other developing markets. But if history is any indicator, the current bubble is likely to burst in the next two to three years, quite possibly leaving China’s resource firms with billions of dollars in worthless global assets.

Bottom line: China’s resource companies could end up with billions of dollars of worthless assets if commodities prices return to historical levels in the next 2-3 years.

Related postings 相关文章:

◙ China Oil Majors Step Into Troubled Waters 中海油卷入南中国海争端

◙ Int’l Miners Dig For China Dollars 外资希望搭载中国矿企全球并购的顺风车

◙ Alternate Fossil Fuels: China’s Newest White Elephant 过度追求替代性化石燃料或给中国留下大量沉重“鸡肋”

Ford, Volvo Step on the China Accelerator 福特与沃尔沃拟在中国大幅扩张

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China’s auto market is showing all the signs of a rapid slowdown after a massive boom that saw it overtake the US as the world’s largest auto market in 2010, but don’t tell that to Ford (NYSE: F) or Volvo, which are happily discussing their latest expansion plans with local and international media. In a way, I have to admire both of these companies and many of their foreign rivals for focusing on the longer-term future rather than the next 1-2 years, which are likely to see China’s auto market post low- to middle-range single digit percentage growth as Beijing slams the brakes on the nation’s overheated economy to try to steer it to a soft landing. But at the same time, Volvo’s plan in particular looks fraught with risk, as it aims to build up a massive new manufacturing base and roll out a new brand with its Chinese parent, Zhejiang Geely, despite little or no name recognition among most Chinese consumers. Let’s take a look at the Volvo news first, which has executives at the Swedish firm finally mimicking its Geely parent by saying it wants to become a Chinese luxury brand and plans to spend $11 billion over the next few years to reach that goal. (English article) Geely founder Li Shufu had always promoted this vision for Volvo since his company purchased the money-losing Swedish brand 2 years ago, but Swedish executives at the company had resisted that vision, preferring to maintain the more mainstream image that Volvo had in the rest of the world. In this latest report, a Volvo executive is also saying the Swedish company will shoulder most or all new investment for its drive into China’s luxury car market. Those remarks are interesting because they seem to indicate that Geely, itself burdened by huge debt from the original Volvo purchase, is trying to add some distance from the massive Volvo expansion plan by making the Swedish company assume all the new debt that such an expansion will require. I don’t want to be too cynical, but such a move seems to imply that if the Volvo plan ultimately fails, responsibility for all its debt will be assumed by Volvo itself, meaning Geely could simply close the unit or let it file for bankruptcy reorganization if its ambitious plan doesn’t succeed — a very distinct possibility. Moving on to Ford, foreign media are reporting the company will spend $600 million to expand capacity at one of its passenger car factories by 60 percent, as it aims to grab more share in the China market from more established players. (English article) This plan seems a bit more modest than Volvo’s, and is part of more gradual approach to China by Ford, which came to the market relatively late through a joint venture with Chang’an Auto and is now attempting to catch up by taking share from both domestic nameplates and global rivals like GM (NYSE: GM) and Volkswagen (Frankfurt: VOWG), which came much earlier. At the end of the day I do like the fact that both Volvo and Ford are investing for the future, though I also think the Volvo plan may be a bit too ambitious and could easily see the company filing for bankruptcy in the next 5 years.

Bottom line: New expansions by Ford and Volvo in China auto are aimed at longer-term development, though Volvo’s plan looks overly aggressive and could end in financial collapse.

Related postings 相关文章:

◙ Geely Eyes Risky New Luxury Route 吉利欲走有风险的豪华车路线

◙ Geely Leans on Struggling Volvo 吉利依靠处于困境中的沃尔沃

◙ China Car Sales Sputter Out of the Gate 中国汽车销售龙年遭考验

Dangdang, GOME In New Alliance, More to Come 国美携手当当网 或开启类似合作序幕

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I’ll close out the week with a couple of Internet items, starting with a tie-up between home electronics retailer GOME (HKEx: 493) and e-commerce specialist Dangdang (NYSE: DANG), both top firms in their spaces, that has the online world buzzing. The other deal involving a small European acquisition by Internet leader Tencent (HKEx: 700) also looks interesting, mostly because it represents one of the company’s first steps into more developed western markets. Let’s start with the GOME-Dangdang deal, which is still unconfirmed but presumably would see the former move most of its online operations onto the latter’s platform. (Chinese article) This kind of tie-up could be the wave of the future, allowing traditional retailers like GOME to focus on their core real-world shops while letting e-commerce specialists like Dangdang handle their online business. We saw a similar tie-up a couple of weeks ago at Dangdang rival 360Buy, which sold a limited number of cars online in a highly successful tie-up with Mercedes Benz. These kinds of tie-ups could work to everyone’s advantage by helping companies focus on their core business while outsourcing related ones to partners, lowering costs and perhaps cooling down an overheated e-commerce market racked by rampant competition and soaring costs. These kinds of tie-ups will play to the advantage of big players like Dangdang, 360Buy and Alibaba’s Tianmao, formerly called Taobao Mall, forcing many smaller players out of business. Moving on to Tencent, media are reporting the company has acquired ZAM Network, a European site specializing in news and online community for gamers. (English article) The fact that no price was given tells me this deal was relatively small, probably less than $20 million. Nevertheless, it still looks interesting as cash-rich Tencent looks to leverage its expertise as a gaming and community development expert into a western market, following its recent string of similar small acquisitions mostly in developing markets. I like Tencent’s overseas acquisitions approach, as it focuses mostly on smaller targets in areas related to its core strengths as an operator of Internet communities. I get the sense that Tencent is still trying to figure out how to become more active in helping its acquisitions to grow and integrate them into its own operations, which is always a challenge but can offer big rewards if done properly. This latest buy could signal a more aggressive advance by the company into more lucrative but also more competitive western markets, with an eventual aim for tying these offshore assets together more closely with the parent company to create a global network of online community specialists.

Bottom line: A new alliance between electronics retailer GOME and Dangdang could mark the start of a wave of similar tie-ups, helping to lower costs and cool down the overheated e-commerce space.

Related postings 相关文章:

◙ Group Buy Clean-Up Grows, E-Commerce Next 团购行业洗牌加剧，下一个是电子商务

◙ Dangdang Loss Balloons In E-Commerce Wars 当当网在电子商务大战中亏损严重

◙ E-Commerce: 360Buy Explores IM, Wal-Mart Gets Serious 京东商城内测即时通讯工具,沃尔玛有意控股一号店

 

Outlook Cloudy As Shanda Refiles for Literature IPO 盛大文学重启赴美IPO计划

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I wasn’t too surprised to read that online entertainment firm Shanda Interactive has refiled to make a New York IPO for its Cloudary online literature unit, which it had to postpone last summer after market sentiment tanked amid a series of accounting scandals at US-listed Chinese companies. (Chinese article) What’s more intriguing is another report saying that Bank of America’s (NYSE: BAC) Merrill Lynch unit, one of the original underwriters, has resigned from the case, and has been replaced by CICC, China’s leading investment bank. (Chinese article) Of course it’s difficult to interpret too much from this kind of development, but we saw similar resignations in several cases last year, most notably from leading group buying site LaShou, after the original investment banks on the offering reportedly had strong reservations about accounting practices at those companies. Shanda Cloudary’s case could be slightly different, as the media reports say the other underwriter, Goldman Sachs (NYSE: GS), is still on the deal, and it’s common knowledge that Merrill Lynch has gone through quite a bit of turmoil since its hasty acquisition by Bank of America at the height of the global financial crisis in 2008. So let’s take a quick look at this deal, which becomes the third New York IPO filing for a Chinese company this year, following previous applications by car leasing firm China Auto (previous post) and Internet e-commerce firm Vipshop. (previous post) Media reports indicate that Shanda hopes to raise up to $200 million in the offering for a literature unit whose revenue rose 78 percent last year to 700 million yuan, or just over $100 million. But the unit is still losing money, posting a net loss of 36 million yuan, marking the second consecutive year of narrowing losses. Fierce competition on China’s Internet has meant that many companies are now losing money, with even formerly profitable e-commerce leader Dangdang (NYSE: DANG) reporting a rapidly widening quarterly loss last week. (previous post) Online literature is a hot area, and Shanda was one of the earlier players in the space, meaning it’s quite possible Cloudary could become profitable in the next year or 2 if competition doesn’t get overheated. But I do sense that Shanda is hurrying this offer before the timing is ideal, probably to raise funds to help pay for the $700 million privatization of the parent company, Shanda Interactive, that just wrapped up earlier this month. Taking everything into account, I would look for this new offering to finally make it to market in the next few weeks, unlike the Vipshop offering which is likely to run into trouble. But even if it does get to market, look for a cool investor reception and a flat to negative trading debut for the stock.

Bottom line: Shanda’s revived IPO for its online literature unit is likely to make it to market, but will meet with cool to negative investor sentiment on its trading debut.

Related postings 相关文章:

◙ Shanda Delists: Thanks for the Profits 盛大网络退市：获利可喜

◙ Shanda Moves Ahead With Privatization 投资者对盛大私有化仍持保留态度

◙ Shanda Cloudary Returns to Market, Worth a Look

E-Commerce: 360Buy Awaits IPO Window, Amazon Expands 京东IPO融资心切 亚马逊物流扩张加剧竞争

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There are a few interesting items out there on the e-commerce space, where local giant 360Buy continues to ready itself for a New York IPO while global giant Amazon (Nasdaq: AMZN) continues its China expansion but is also learning just how price sensitive local consumers can be. Let’s look first at 360Buy, which also goes by the name Jingdong Mall. The company made headlines last year when it received a $1 billion investment from a group that included Russia’s Digital Sky Technologies (DST), which estimated at that time that 360Buy could be worth $10 billion. (previous post) Since then, the company has been locked in a series of cutthroat price wars in the overheated e-commerce space, most notably with Dangdang (NYSE: DANG), causing it to burn through a big portion of its cash and announce last fall it was preparing for a New York IPO, even though it was still losing big money. (previous post) Now Chinese media are reporting the company has been quietly bringing in a new group of professional top-tier managers as it still readies for the IPO despite several delays. (Chinese article) I’m sure that 360Buy desperately needs cash from the IPO, and that it is just waiting for 1 or 2 Chinese companies to make successful offerings before filing its own prospectus. That said, we could see this offering take place as early as March or April if market sentiment improves. Meantime, media are reporting that Amazon is continuing its aggressive China expansion by opening a new logistics center to serve the Tianjin-Beijing area, following its opening of another massive center near Shanghai last fall. (English article) But I was also amused to read another report that the company is adding a delivery fee to all orders under 29 yuan, in what clearly looks like some frustration at the small size of orders from many Chinese consumers. (Chinese article) My advice to Amazon would be to be careful, as it risks raising the ire of Chinese consumers with this kind of move, and everyone knows that upsets Chinese Internet users are quite effective at running negative backlash campaigns.

Bottom line: Cash-starved 360Buy could launch its IPO as early as March, while Amazon’s rapid expansion will add even more competition to the market.

Related postings 相关文章:

◙ 360Buy IPO: Let the Delays Begin 京东商城放缓IPO进程

◙ Amazon Name Shift Signals China Ramp-Up 亚马逊改名背后折射中国野心

◙ More Stumbles for Saab Rescue, 360Buy IPO 搭救萨博和京东商城IPO两计划注定命运多舛

China Slams the Brakes on Automakers 中国为汽车行业踩刹车

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A slightly ominous memo from the National Development Reform Commission (NDRC), China’s state planner, indicates Beijing plans to slam the brakes on approvals for major new auto-making investments, a much needed development for the overheated industry that could end up driving many smaller players out of business. The memo, detailed in a media report (English article), says China will strive for “healthy development” of the auto industry, with a focus on nurturing new industries — words that point to a sharp slowdown in approvals for major new projects except perhaps in the new energy arena. That should come as welcome news for an industry that has seen billions of dollars in new investment announced over the last 2 years, mostly by joint ventures between big foreign automakers and their Chinese partners. (previous post) After seeing turbo-charged growth in 2009 and 2010 due largely to economic incentives from Beijing, China auto sales have slowed to almost a halt this year as most of those incentives expired and the government turned its focus from stimulating the economy to cooling it down instead. Chinese vehicle grew just 2.6 percent in the first 11 months of this year, a major slowdown from the 32 percent growth rate last year and even higher growth in 2009, as China overtook the US to become the world’s biggest car market. Major new investment plans announced by the likes of Volkswagen’s (Frankfurt: VOWG) Audi, Ford (NYSE: F) and BMW (Frankfurt: BMW) for their China joint ventures were all undoubtedly planned during the boom times of 2009 and 2010, and the market is likely to become seriously oversupplied as they start to produce over the next 2 years, putting pressure on everyone, especially small- to mid-sized domestic manufacturers without major overseas partners. Such domestic companies, like BYD (HKEx: 1211; Shenzhen: 002594), Geely (HKEx: 165) and Chery, are already showing signs of stress with sales growth well behind that of their better-connected rivals, and that trend could accelerate as the new capacity comes on stream. In terms of new investment, look for a trickle of new energy auto initiatives to be announced and approved in 2012, most of them largely insignificant. In the meantime, watch for growth of the mainstream auto market to stay in the low single digits next year, with many smaller players slipping into the red — perhaps permanently.

Bottom line: Smaller automakers without big foreign partners are likely to slip into the red next year as growth slows, with Beijing unlikely to approve any major new investments.

Related postings 相关文章:

◙ China Autos Set for Long Slowdown

◙ Chery, Luxury Cars Hit New Speed Bumps

◙ Foreign Spending Spree Augers Woes for China Car Makers 外国车企大举投资中国 本土车企倍感压力

Caterpillar Places Mining Bet With New Buy 卡特彼勒收购中资矿山机械企业押注中国矿业未来

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Caterpillar (NYSE: CAT), the US maker of heavy construction equipment used to build everything from office towers to roads, is no dummy when it comes to knowing where the future growth is, as reflected by its latest plan to buy a Chinese mining equipment company. (English article) The company announced it wants to buy ERA Mining Machinery (HKEx: 8043) for HK$0.88 per share, or a 33 percent premium over its last closing price. From my perspective, this looks like a very smart move by Caterpillar to boost its presence in an area that China has clearly earmarked for development, namely the mining sector as Beijing aims to reduce its reliance on imported iron ore and coal to feed its hungry economy. As it seeks to achieve that goal, the country’s miners, such as Shenhua (HKEx: 1088) and Yanzhou Coal (Shanghai: 600188; HKEx: 1171), as well as iron ore producers, are likely to need new equipment to develop resources not only at home, but also abroad. The move is also a smart hedge against the more traditional users of heavy construction equipment, namely the infrastructure and real estate industries, which are both overheated and look set for major slowdowns in the next 2 years. Despite the real estate industry’s cloudy outlook, Soufun (NYSE: SFUN), a leading provider of online real estate services, has just surprised the market with very strong earnings, with revenue nearly doubling in the third quarter and profit growing by an even stronger amount. (company announcement) Soufun shares plunged nearly 9 percent on Thursday before the results came out, and only bounced back slightly in after hours trading after the upbeat announcement. I expect we may see some bigger gains on Friday on this upbeat report. Still, this positive result is probably more a sign that a long-awaited correction in China’s real estate market is finally beginning rather than any improvement in the market. That’s because Soufun makes its money on transaction volumes that are finally starting to grow after months of stagnation, as many cash-needy real estate owners waiting for the market to improve finally start selling their properties at reduced prices.

Bottom line: Caterpillar’s purchase of a mining equipment maker looks like a smart move, drawing on China’s goal of boosting its self-reliance in the important energy and steel sectors.

Related postings 相关文章:

◙ China Makes Up Its Mind: Iron Ore 中国终於下决心：大幅增加国内铁矿石供应

◙ Soufun Shores Up Foundation With Strong Results, Outlook 搜房网靓丽财报和前景或预示房产业向好

◙ Sofun’s New Strategy: Dividend Wave Ahead? 搜房网新策略：中国概念股派息潮即将来临？

Ford Comments Signal Accelerating Price Pressure 福特暗示中国车市价格压力加剧

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The first quiet signs have emerged that a price war is building in China’s chilly auto market, with Ford (NYSE: F) disclosing that it’s coming under pricing pressure as sales slow under economic cooling measures from Beijing. (English article) The comments from Ford’s Asia chief at a recent US event were very low key, only saying the company has seen pricing pressure in the last 3-4 months. He didn’t give any numbers, but I’ve been  in the news business long enough to know that executives don’t usually make this kind of comment unless they want to brace investors for disappointment or worse. After more than a year of blistering growth of 50 percent or more, fueled in large part by incentives from Beijing, China’s auto market has slowed considerably in the last few months to low single-digit growth and even contraction. Unit auto sales were up an anemic 2 percent in July (English article), but that number says nothing about prices, which I suspect are down 5-10 percent from the previous year as many larger cities limit new buying to ease congestion. The pressure is likely to intensify in the coming year, as billions of dollars in spending on new capacity announced during the boom period start to come online. Smart players like General Motors (NYSE: GM) are bracing themselves for the coming China winter by exporting their China models and designs to other emerging markets and by developing new brands aimed at smaller cities where the slowdown won’t be as big. GM officially launched its made-in-China Baojun brand just last week (English article), and said earlier this week it will use made-in-China kits to build a locally developed minivan in India. (English article) But while GM and its China partner, SAIC (Shanghai: 600104) have the resources to make such protective moves, other domestic players like BYD (HKEx: 1211) and Geely (HKEx: 165) look much more vulnerable, and are likely to see their profits drop sharply in the months ahead or even sink into the loss column.

Bottom line: Ford’s recent comments indicate prices are dropping in China’s overheated car market, with the pressure likely to continue for at least the next year.

有初步迹象表明中国汽车市场将打响价格战，汽车巨头福特(F.N)称感受到定价压力，因中国旨在令经济降温的措施导致汽车销售放缓。福特负责亚太业务的负责人此番表态相当平和，只是说过去三四个月中感受到了定价压力。他未提供数据，但我在媒体界多年，深知企业高管很少会作这样的表态，除非他们希望投资者作好悲观准备。去年得益于政府刺激措施，中国汽车市场增速至少50%，而过去几个月则明显速度放缓，甚至到了萎缩的地步。7月汽车销量增长2%，但这根本没有反映出价格因素，我推测汽车价格同比下降了5-10%，因为许多大城市出台限购令，以解决道路拥堵。未来一年车市价格压力可能加深，因厂商扩充产能的投资将到位。象通用汽车(GM.N)这样精明的厂商已经相应作了调整，将在中国生产车型和设计向其他新兴市场推广，并面向小城市开发新的品牌，因为这些城市的汽车销售放缓程度没那麽严重。通用上周刚刚正式推出“中国制造”的品牌“宝骏”，且本周稍早称，将对在中国设计的小型货车进行改造，在印度生产和销售。虽然通用与上汽(600104.SS: 行情)有足够资源采取这类自我保护性举措，但其他国内汽车厂商，譬如比亚迪(1211.HK)和吉利(0175.HK)则更容易受到冲击，未来数月利润可能大幅下降，甚至可能出现亏损。

一句话：福特近期言论意味着，中国汽车售价将呈下滑，这样的压力可能至少在未来一年中将持续。

Related postings 相关文章:

◙ Nissan Jumps on China Expansion Bandwagon, Overcapacity Ahead 日产加入中国市场扩张潮 未来料产能过剩

◙ China’s Car Rebound: Price War Looming? 中国车市反弹：价格战越来越近？

◙ BYD: Running on Empty? 比亚迪：累了？

Beijing Money Shut-Off Reaches a Roar, Real Estate Suffers 银行贷款下降 房地产市场受压

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In what should really come as a surprise to no one, newly released data is showing that new lending by Chinese banks tumbled 14 percent percent in May, even as economists were expecting a slight rise, as part of Beijing’s efforts to slow its racing economy and cool the overheated real estate sector. (English article) Regular readers of this blog will note that I previously said the slowdown could be stronger than many were expecting, after E-House (NYSE: EJ), a leading online real estate services firm, earlier this month reported decidedly downbeat Q1 earnings and forecast more gloom in the coming quarters. (previous post) People who follow China know that Beijing has raised interest rates and bank reserve requirements a number of times over the last six months in a bid to slow down lending. But the untold story here is the less apparent behind-the-scenes effect of Beijing’s market-cooling drive, which has seen banks — which take their orders from the central government — slow down many of their lending processes. Anecdotes on the ground abound about people with good credit unable to get loans for new homes or cars due to delaying by banks — a common Chinese government tactic when there’s no good reason for an outright refusal. The upside of all this is that such delays — which have no basis in real economics — can easily be reversed if Beijing starts to worry about too sharp a slowdown. But in the meantime, look for real estate and car sales to continue their rapid slowdown, with volumes and prices likely to decline in the healthy double-digits at least for the next few months. At the same time, look for stagnation or even declines in bank profits as well as their interest income slows.

Bottom line: Beijing is in no hurry to end a sharp drop in bank lending, meaning prices and sales volumes for big-ticket items like cars and homes will continue falling for the next few months.

在中国政府着力给经济和房地产市场降温之际，最新数据表明，5月份银行新贷款减少14%，这一数字也许并没有出乎任何人的预料，虽然曾有经济学家预计贷款会有小幅增加。经常阅读我的博客的读者会记得，我曾经说过，房地产业此番降温力度将超过很多人的预料。此前一家网络房地产服务商易居中国<EJ.N>本月稍早公布惨淡的一季度财报，并预测未来几个季度更不乐观。熟悉中国情况的读者会知道，中国政府在过去的半年里几次加息和提高银行存款准备金率，以收紧信贷。但这造成的一个後果是，连许多信用记录良好的人也没法及时拿到买房子或车子所需的贷款——包括银行暂时推迟放款。无论如何，房地产和汽车销售都将继续快速下滑，而随着利息收入减少，银行业利润也会停滞不前甚至下降。

一句话：中国政府并不急於结束目前的信贷大降局面，这意味着未来几个月，汽车和房屋的价格和销量都将继续下降。

Related postings 相关文章:

◙ E-House Foundations Looking Outright Shaky 易居中国根基明显摇晃

◙ Autos: Good Times Screech to a Halt 中国汽车业：当繁荣已成往事

◙ ICBC: Maintaining Profits, As Shareholders Foot the Bill

BYD Sell-Off … Price War Looming?

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Could reports that car maker BYD (HKEx: 1211) has slashed prices in order to sell off bloated inventory sitting on dealer lots mean the beginning of a price war for China’s overheated car industry? Some mainland media are saying yes. After all, car makers are already under pressure to keep their red hot sales going, lest China lose its crown as world’s biggest car market, even after Beijing scrapped many of the incentives that caused the market to overheat in the first place. We’re already seeing sales growth slow, and Chinese companies are famous for their willingness to sacrifice everything — including profits — to keep their top line growing. Still, talk of a price war could be premature. In my view, BYD has lots of lemons sitting on dealer lots, and is desperate to get them out of the system and onto the roads. This could lead to temporary pricing pressure, but once these clunkers are out of the way we should see sales slow but prices staying relatively stable.