The Sinocism newsletter is compiled by Bill Bishop, and republished here with permission. Be Informed About China. The Sinocism China Newsletter. Free.
ABC News continues with its investigation of China stock frauds (better late than never…) and in the latest instalment looks at Rodman & Renshaw, once a leading shoveler to US markets of Chinese… companies… whose chairman was a prominent American General and aspiring presidential candidate. In China Fraud Accusations: Wesley Clark’s Ex-Firm Faces Questions ABC News reports that:
Retired U.S. Army General and former presidential contender Wesley K. Clark was the chairman and public face of a Wall Street investment firm that rode a wave of interest in Chinese stock, and then plunged on reports that much of the profit was hype and many of the companies were outright frauds.
Now the China deals Clark helped promote at lavish parties are among those facing scrutiny from the Securities and Exchange Commission as they try and account for the billions of dollars lost in dozens of suspicious stock offerings, which some officials believe represent collectively one of the largest financial scams since Bernie Madoff. Authorities told ABC News that firms serving as middle men who helped promote the Chinese companies are now in the crosshairs…
One of the firms that pushed most aggressively for investment in Chinese companies was Rodman & Renshaw, a boutique operation based in New York and chaired by Clark, the retired four star general and war hero who mounted a bid for the Democratic presidential nomination in 2004. Clark became chairman of the investment firm in 2009, just as it was emerging as a central player in the China investment wave. He left the firm in mid-2012, and declined repeated requests from ABC News to discuss his tenure there…
The general did not run day-to-day activities at the firm, instead chairing board meetings and lending his star power during extravagant annual conferences, where investors were invited to hear presentations from dozens of Chinese companies trying to attract financing as they joined American stock exchanges. The conferences were luxurious affairs held at the Waldorf in New York and Le Royal Meridien Hotel in Shanghai. Henry Kissinger spoke at one, former Sen. Chris Dodd, D.-Conn., at another. Diana Ross performed, as did En Vogue.
Another American with ties to a sketchy China firm has cut what sounds like a wrist-slapping deal with the US government. As Bloomberg reports in Ex-Xinhua Finance CEO Bush Signs Plea Deal:
Xinhua Finance Ltd.’s former chief executive officer, accused of joining a $50 million insider- trading scheme, signed a plea agreement with U.S. prosecutors resulting in a single charge of conspiring to obstruct the Internal Revenue Service.
The filing of a criminal information in a pending case signals the defendants have reached a resolution with the government and that remaining counts of an indictment will be dismissed, said Bernie Grimm, a criminal defence lawyer in Washington who isn’t involved in the case.
Under the indictment all three defendants faced four charges of mail fraud, each of which carried a maximum penalty of 20 years in prison.
When I was at MarketWatch we had a deal with Xinhua Finance, I met Fredy Bush a few times, a former colleague was a director of her company and I bought shares after the IPO and lost money. Shows what I know…
There have been an inordinate number of China stock frauds. Media coverage has focused more on the Chinese participants while mostly ignoring the foreign enabling ecosystem that allowed this garbage to steal money from overseas investors. The SEC and ABC seem to have finally have discovered that these sleazy Westerners are also a target rich environment.
From what I am hearing, some interesting Chinese reporting on Caterpillar’s ERA fraud is forthcoming. Due diligence standards for M&A in China need to be upgraded.
THE ESSENTIAL EIGHT
China Manufacturing Expands at Fastest Pace in Two Years – Bloomberg – China’s manufacturing is expanding at the fastest rate in two years, according to a private survey of companies, bolstering prospects that economic growth will accelerate for a second straight quarter. The preliminary reading of a Purchasing Managers’ Index was 51.9 in January, according to a statement from HSBC Holdings Plc and Markit Economics today. That compares with the 51.5 final reading for December and the 51.7 median estimate of 17 analysts surveyed by Bloomberg News.
Apple Discloses China Revenues – Business Insider sounds good, but sequential growth way below that of other geographies// Greater China (which includes Taiwan and Hong Kong) revenues were $6.83 billion, up from $5.43 billion in the previous quarter and $4.08 billion a year ago. That represents growth of $26 per cent and 67 per cent, respectively.
Apple in China: still on a tear | beyondbrics But Coolpad’s surge in sales growth does not come without costs. Gross profit margin at China Wireless was 12 per cent in the six months to end of June 2012, down from 16.8 per cent from the period the year before. This is less than half of the 38.6 per cent in gross profit margin reported by Apple for Q1. //respectable for a Chinese firm, a big mistake to assume that Coolpad will go away because it has razor thin margins…//The numbers are all the more impressive given that China Mobile, the country’s biggest mobile operator, doesn’t distribute iPhones.The introduction of a new Apple financing scheme in China last week could be one way for the iPhone maker to recapture market share without going down the low-end route. But this remains to be seen. But few would argue that Apple is doing alright in China.// but people expect a lot more than “alright”, and Apple no longer has the hot phone. Samsung taking share at top, Apple has completely missed the middle market, which it has in many other markets with its subsidized carrier deals. For whatever reason Apple appears to have thought it has leverage with China Mobile. Whatever leverage it had, or thought it had, it no longer does as it is not selling the most desired phone in China anymore…
北京”公务员房”神秘卖家：随身带房本 午夜签合同|北京官员抛房|财产公示|住房联网_21世纪网– nice anecdotes about officials selling property in face of corruption crackdown, expect to see repeated in some bear PPTs and posts..still dont think big enough surge in sales to hit the market..could be wrong, but so far prices up, reporting on it has not noted any numbers that would have material impact on the real estate markets// 据21世纪网了解，近来在网上出现的诸多抛售政府资源房的信息是真实的。这些抛售的房源所在社区大都是周边设施配置优越，之前出售甚至出租的情况都甚少。因此，这些房源一旦推向市场，立刻吸引了不少消费者的关注。
Investors in Fraudulent Wealth Management Plan Repaid – Caixin – Investors who bought into a fraudulent wealth management plan got their money back without interest. About 80 investors have received payments equal to their principal investment, several investors said. They agreed not to seek any interest. The agreement was reached at a meeting on January 9 at Huaxia Bank’s Jiading branch in suburban Shanghai, where the wealth product was sold. The deal means that no bank wealth product has ever been allowed to fail in China.
Urban Platforms in a Policy Pressure Cooker – Caixin- Game rules are changing for urban China’s quasi-market financing platforms that have been fueling local government infrastructure projects ever since the global financial crisis. And the game players – mainly government officials in cities, townships and districts for whom the platforms have been convenient cash cows – are getting nervous. Officials digesting the rules released December 24 are looking for new ways to service existing platform debt, estimated by the central government at 10.7 trillion yuan nationwide as of late 2010. They also need financing for highways, subways, tourist venues and other construction projects planned or under way. //poor local officials, squeezed from every side…and now much harder to run away…
China to Cap Electricity Growth at 8 per cent Through 2015 – Bloomberg – In an outline of energy-development goals under the country’s 12th five-year plan, China plans to reduce energy consumption by 16 per cent annually and carbon emissions by 17 per cent, as measured per unit of gross domestic product, from 2010 to 2015, according to a statement today on the website of China’s State Council, China’s cabinet. The plan, which anticipates a near doubling of consumer power consumption per capita, calls for China to get 11.4 per cent of its electricity from non-fossil sources by 2015, up from 8.6 per cent in 2010, while reducing coal’s share of generating capacity from 68 per cent in 2010 to less than 65 per cent.
Official Newspaper Blames Local Govts for Overcapacity Which Threats Chinese Economy-Caijing – A Chinese ruling party’s mouthpiece newspaper has blamed local governments for the country’s excess capacity problem which has long plagued the world’s second-biggest economy, and warned that the persistent obstinacy may lead to a systematically economic collapse in the country without control. The People’s Daily said in a commentary published Wednesday that overcapacity now extends to emerging industries, and is becoming an increasingly big obstacle to the economy’s recovery.
SOEs dominate Beijing’s commercial property market WantChinaTimes.com State-owned and public real estate firms dominated the 2012 list of Beijing’s top 10 property developers in terms of the transaction values, while only two private enterprises entered the list, figures from the Beijing Real Estate Trade Management website reveal. The numbers show that state-run property companies, including Beijing Urban Construction Group, Zhonghai Construction Group, China Railway Construction Corp, Poly Property Group and Beijing Capital Development, occupied the most most of the top 10. Just two private companies, Longfor Properties and Soho China made the list; in 2011 three did.
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