Homegrown credit risks look to come back home to roost. I am actually shocked the following development didn't get more traction in the mainstream media. The recent announcement by the Chinese finance ministry to nullify all guarantees for local governments for loans taken by their financing vehicles, and its plan to issue rules banning all future guarantees by local governments (see Bloomberg article), fuels (even further) our concerns about credit risks on such loans.

The primary concern is that most of these were non-recourse loans to provinces, municipalities and counties through shell companies, known as Urban Development Investment Corporations (UDIC). Some went to fund projects backed by assets, such as commercial real estate, others to projects with future cash flows such as subways and toll roads. Still others are social in nature and backed only by an implicit guarantee of the City/Provincial Investment Holding Corporation (CIHC).

The Chinese have recently released statements indicating that they are not interested in buying gold and that they plan on remaining "responsible investors" in U.S. treasuries. China is not known for informing the market about what it is actually doing. It instead has a long history of keeping its actions carefully hidden. It would therefore be reasonable for investors to assume that China is buying gold and selling U.S. treasuries.

The case for China doing the opposite of what its official statements indicate goes well beyond mere assumption. When TIC (Treasury International Capital) data was released in November and December, the numbers indicated that China was a net seller of U.S. treasuries. This potentially explosive news got little mainstream media coverage. China also announced in April 2009, that its gold holdings were 76% higher than had been previously reported earlier in the decade. China didn't mention it was buying this extra gold while it was doing so. Don't expect it to announce its gold purchases in the future either.

HMIN)" hspace="6" vspace="6" />It’s no secret that the Chinese economy has experienced tremendous growth – even during the global financial crisis. A demographic shift towards the middle class has bolstered demand for goods and services, and we are seeing a wide portion of the population moving towards China’s rapidly growing cities. However, as with any rapid economic expansion, economists are beginning to wonder just how fast is too fast. It seems that there is serious potential for China to stumble and lead the globe back into an extended economic slump.

The Chinese equivalent of the Federal Reserve appears to have concern with the situation as they have begun tightening reserve requirements for banks which essentially reduces the amount of capital available for lending purposes. The moves have been minor in nominal terms, but the banks are getting the message… “Cut back on lending and get your books in order.” No one wants to see a repeat of the US banking crisis from 2008.

SkyPeople Fruit Juice (SPU) is an unknown, yet, exciting juice, beverage and fruit products producer in China. The company was recently listed on the AMEX exchange a few months ago and the story has begun to get discovered by an institutional base of shareholders. SPU has an experienced and polished management team in place. In the past three years, management has doubled its revenues from $29.3 Million in 2007 to an expected $58-$60 Million in 2009. With an improved industry outlook, record sales and earnings, and a capacity ramp-up underway that will lessen the company’s seasonality, we feel that SkyPeople has hit an important inflection point.

We are bullish on SPU for a number of reasons. For those looking to get in on a long-term secular trend, the concentrate juice market has started growing once again worldwide. This market has big growth potential in China and SkyPeople is poised to grab market share from its more entrenched competitors in the coming years. Due to its ability to access important raw materials and because of its low-cost manufacturing operation, SPU has inherent advantages over its bigger competitors.

China's CNOOC Ltd (CEO) and France-based Total SA (TOT) have recently submitted their development plans for three Ugandan oil blocks to the Ugandan government. The government's decision is expected before the end of this month, as per Dow Jones Newswires.

More than 1 billion barrels of oil have been discovered in these blocks. U.K.-based Tullow Oil, with a 50% ownership in two of these blocks and 100% in the third, has selected CNOOC and Total as potential partners for their development. Tullow is currently in the process of getting the Ugandan government’s nod to purchase the remaining 50% interest in the first two blocks from U.K.-based Heritage Oil.

Expected Chinese yuan improvement could provide us with an investment opportunity. However, before going there, I thought a review of challenging exchange rate math would help ensure full understanding.

To start, if I said I just bought gasoline for $3.00 a gallon, you’d know exactly what I meant. And if you saw that gas had risen from $3.00 to $3.30, you’d know that there had been a 10% increase. These pricing and percentage change conventions are ingrained into our everyday thinking. Now let’s enter the currency exchange world…

As expected, WuXi PharmaTech (NYSE: WX) reported 2009 net revenues of $270 million, an increase of 7%. Net income climbed to $52.9 million compared to a loss of $64.2 million in 2008, when the company took a significant $49.3 million writedown of its US-based biologics manufacturing business, which was part of its AppTec acquisition. Revenues matched analysts’ expectations, while earnings were slightly below forecasts.

For 2010, WuXi PharmaTech expects revenues to rise a further 15-19% to $310-$320 million. The company says its China-based Laboratory Services business and an improving Manufacturing Services business will both contribute to the growth. The new toxicology facility at Suzhou, however, will create pressure on margins during the second half of the year as WuXi ramps up operations in the lab. The company does not expect the tox lab to contribute meaningful revenues during 2010.

By Platinum Tiger

U.S.-listed Chinese small caps overcame generally listless market conditions on Monday and rallied to their second day in a row of two percent-plus gains, finishing the day at their highest level since January 15th. Gainers outpaced losers in the session by a ratio of more than 2:1, with pharmaceutical stocks leading the charge with a nearly 3 percent average gain. Chinese small caps have now advanced nearly 15 percent for the year thus far, and the sector looks poised to continue its gains in the coming weeks.
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New all-time highs were reached on Monday by 7 of the 35 stocks in our China OTC Player index, including AMCF, CAHS.OB, CELM], [[CT]C, JNGW.OB, LLEN and SOKF.OB. Other noteworthy results for the day included a 37 percent gain for CHGI.OB and a 33 percent gain for CSGJ.OB, both on heavy volume.

Yingli Green Energy Holding Co. Ltd. (YGE)

Q4 2009 Earnings Call

March 8, 2010 8:30 am ET

New Energy Systems (NEWN.OB), SinoCoking (SCOK) and Sinoclean Energy were all stocks that traded at a significant discounts to their fair value and subsequently skyrocketed. China Carbon Graphite (CHGI.OB) has the potential to be the next skyrocket stock.

In August 2009 I received an email from a New York based hedge fund manager who was holding a very large position in a small cap Chinese maker of lithium ion batteries based in Shenzhen. He was concerned that this opportunity was “too good to be true.” He told me that the stock was trading so cheaply (at $2.00 and only 2x earnings) that there could only be two conclusions. Either (a) the company was a total fraud, or (b) this was the buying opportunity of a lifetime. I arranged a meeting with management and booked a flight to Shenzhen where I toured the factory and met with the CFO, the CEO and the head of sales. As it turned out, I was very impressed by the company and by management. The factory was clean, well organized and production was humming along at a busy clip. I told the hedge fund manager my conclusions and subsequently “loaded the boat” myself, buying all the stock I could get my hands on. In subsequent months I continued to provide suggestions to management on how they could improve their capital markets profile and I introduced them to a number of other investors and investment banks who could hopefully provide research coverage in the future.

Manulife Financial Corporation (MFC) is continuously growing its operations in China. Recently, the China Insurance Regulatory Commission (CIRC) approved Manulife-Sinochem, Manulife's joint venture company, to operate in Linyi and Yancheng. Manulife-Sinochem is now licensed in 41 cities of China.

Manulife-Sinochem is a joint venture company between Manulife (International) Limited (51%) and China Foreign Economic and Trade Trust & Investment Company, a member of the Sinochem group (49%). Manulife-Sinochem began operations in November 1996 and was the first Chinese-foreign joint-venture life insurance company established in China. The company currently serves over 500,000 customers across China through approximately 11,000 professionally-trained staff and agents.

China Unicom (CHU), the second largest Chinese wireless carrier, is reportedly planning to launch iPhone with Wi-Fi (wireless broadband) function in mainland China. The carrier is currently working with Apple (AAPL) regarding this advancement. However, no specific timeline for the launch has been announced.

This represents a major step by China Unicom, as lack of Wi-Fi support in the Chinese version of the iPhone has been a major hindrance in its wider market adoption. If the launch materializes, the company plans to compensate the current iPhone users (who lack Wi-Fi) by allowing greater use of its 3G network.

Well, when all was said and done, Friday's payroll report wasn't half bad. The BLS clearly scuffled with figuring out just how much of an impact the snow had on the data, but even so, with only a marginal adjustment for the weather, you'd end up with a pretty decent set of figures.

The reaction in equities and "pro-risk" currency pairs was fairly predictable, though the decent performance of European currencies may have been a modest surprise. The star performer was, of course, the yen complex.

China Advanced Construction Materials Group, (CADC or the “company”) is an undervalued and undiscovered stock which represents an interesting way to capitalize on China’s massive infrastructure build out. CADC is a major provider of concrete for large infrastructure projects.

The company is one of only 10 companies that is certified to provide concrete for national infrastructure projects and the company has long-standing relations with China’s top contractors and construction companies.

by Nick Hodge

Last week was a busy week for cleantech news. But above all else, we finally got a week that looked like this for nearly all green sectors:

Jimmy Rogers, traveling the world from his Singapore home base, is adamant when he states that most western countries in debt up to their eyeballs to the Asian Pacific world face an economic holocaust. How this plays out is open to speculation, but many scenarios look grim for the spenders and bright for the lenders.

Investors who want to explore exposure the Asian Pacific region may want to explore regional banks with a strong yield that are traded in US markets. I like three of them:

Stories of rapidly inflating property prices, loose credit and off-plan speculation sound only too familiar to veterans of the Dubai real estate crash, and yet this is what we hear from Shanghai these days. How long before the Chinese property bubble bursts?

Of course, it is wrong to compare a wealthy, advanced economy like Dubai with an emerging market economy like China with very low salary levels. And yet this also highlights the severity of the problem in Chinese real estate right now.

Shanghai prices

Shanghai property is presently 50 percent more expensive than in Dubai, and yet per capita income in Dubai is up alongside American levels, and higher for most property buyers who still mainly pay in cash and not debt.

I have written before that Britain and Pound Sterling (GBP) could be the canary in the mine for the US because of the similarities in their economies, except that the UK is not in the envious position of being the issuer of a major reserve currency.
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These days Pound Sterling is falling apart. What's more, the UK housing market seems to be moving into double-dip territory:

The housing market seems set to undergo its own "double-dip" recession, with Halifax announcing yesterday that there was a 1.5 per cent fall in house prices between January and February, and with the slow economic recovery now on course to depress sentiment for the rest of the year.

In this article, I summarize my latest investment ideas on China Internet stocks based on major events and data points in the past week.

Giant Interactive (GA) still has plenty of upside due to new games' strengths. GA rose 4.8% last Friday on good 4Q09 results and 1Q10 outlook. I believe GA still has plenty of upside because most investors have not noticed recent strengths of Giant's new games Golden Land (webpage game) and Dragon Soul (3D MMORPG), which in January achieved PCUs of 80K and 70K respectively, according to my research. These two games are still in closed beta testing, and their usage will grow significantly after large-scale marketing begins ahead of their open beta. Based on my research, I forecast Dragon Soul will surpass 200K PCUs in 2010 and become Giant's next hit game. I believe Giant's stock is a "Strong Buy" at current levels.

China was the world’s largest economy before 1890. According to Professor Angus Maddison, author of Chinese Economic Performance in the Long Run, China’s role in the world has changed dramatically in the last thousand years and China is likely to become the world’s largest economy by 2015 beating the US. The author mentions that China’s economic growth in the next 30 years will not be diminished due to the recent global credit crisis.

The graph below shows the possible futures for the economies of China and the US: