(SHANGHAI) China’s mutual fund sector incurred a record 1.08 trillion yuan (S$223.2 billion) in paper losses in the first half of this year due to the stock market’s tumble but management fees more than doubled from a year earlier, the official Shanghai Securities News reported yesterday.
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1t yuan paper loss for funds
(SHANGHAI) China’s mutual fund sector incurred a record 1.08 trillion yuan (S$223.2 billion) in paper losses in the first half of this year due to the stock market’s tumble but management fees more than doubled from a year earlier, the official Shanghai Securities News reported yesterday.
Equities-oriented funds, which put at least 60 per cent of their assets into shares, posted a combined unrealised loss of 1.06 trillion yuan.
Qualified Domestic Institutional Investor (QDII) funds, which invest abroad, had a combined unrealised loss of 24.7 billion yuan, due to weak overseas markets.
Money market funds were the only gainers, with a paper profit of 1.30 billion yuan. The data was based on first-half results published by 364 funds managed by 59 fund companies, the newspaper said.
China’s benchmark Shanghai Composite Index lost nearly half its value during the first half of the year, weighed down by worries over an economic slowdown and fresh supplies of shares.
The tumble followed a two-year bull run that boosted share prices six-fold while the mutual fund sector grew almost seven-fold to more than three trillion yuan.
Despite the hefty paper losses, or losses on securities that are still held by fund managers, combined realised losses in the fund sector were a more modest 101.4 billion yuan.
Fund managers collected 18.8 billion yuan in management fees during the first half, up 120 per cent from a year earlier. The top 10 earners accounted for half of the sector’s total fee income, led by China Asset Management Co, which collected 1.53 billion yuan.
The Fed can learn from history’s blunders
By Barry Eichengreen
18 August 2008
One of the chief ways financial market participants make sense of events is by drawing parallels with the past. The subprime crisis, when it first erupted, was widely perceived as the most dangerous financial crisis since the 1930s. The implication was that it was critical to avoid the policy mistakes that transformed that earlier crisis into a macroeconomic disaster. The lesson drawn was that it was important to avoid an excessively tight monetary policy.
Now, with inflation rising, the popular parallel is not the deflationary 1930s but the stagflationary 1970s. Again the implication is that it is important for policymakers to avoid past mistakes. In this case past mistakes mean a monetary policy that allows inflation expectations to become unanchored.
In fact both analogies are misleading, precisely because market participants and policymakers are aware of this history. Their awareness means that financial history never repeats itself in the same way. Biochemists can replicate their experiments because molecules do not learn. Central bankers lack this luxury.
In the 1930s the critical mistake was the Federal Reserve’s failure to recognise its lender-of-last-resort responsibilities. The result was not just financial distress but the collapse of the US price level, which fell by 21 per cent between 1929 and 1932. Since demand for commodities, including food and oil, was inelastic, their prices fell even faster than the overall price level, causing distress among primary producers.
And since other currencies were linked to the dollar by the fixed exchange rates of the gold standard, US deflation caused foreign deflation. As US demand weakened, other countries saw their currencies become overvalued. They were forced to raise interest rates in the teeth of a deflationary crisis. By raising interest rates, foreign countries transmitted deflation back to the US. Only when they delinked from the dollar and allowed their currencies to depreciate did deflation subside.
The difference now is that the Fed knows this history. Indeed Ben Bernanke, the Fed chairman, wrote the book on the subject. Seeing the analogy, his Fed has responded to the subprime crisis with aggressive lender-of-last-resort operations. If anything, it may have been too impressed by the analogy. Its mistake was to cut interest rates so dramatically at the same time that it extended its credit facilities. It would have been better to lend freely at a penalty rate. Higher interest rates would have made its emergency credit more costly and led to better-targeted lending and less inflation.
The Fed’s response has forced other central banks that manage their exchange rates against the dollar, mainly in Asia, to import inflation rather than deflation. Their currencies have become undervalued rather than overvalued. As their real interest rates have fallen, these countries are now exporting inflation back to the US. Where global deflation led to the collapse of commodity prices in the 1930s – devastating those countries dependent on exporting commodities – our current inflation is having the opposite effect. This time, primary producers are the biggest beneficiaries.
What is the solution? Emerging markets need to tighten their monetary policy further to damp down inflation. They need to revalue against the dollar to fend off inflationary pressures coming from the US, just as they needed to devalue in the 1930s to protect themselves against US deflation. We have seen small steps in the right direction, such as the interest rate rises recently agreed by the Bank of Korea and Bank Indonesia, but more needs to be done.
The Fed’s position is harder. If it now tightens, it risks compounding the recession. If it fails to do so, it risks undermining confidence and precipitating a dollar crash – which could still happen, in spite of the recent relief rally. Here the historical analogy is direct. In the 1930s the US needed expansionary policies to counter the depression but worried that moving too aggressively would demoralise markets and destabilise the dollar. Franklin Delano Roosevelt personally oversaw the process, setting the new dollar exchange rate each morning while taking breakfast in bed. In hindsight, his judgment looks sound.
One hopes that history will judge the Fed as favourably. James Bryce, the historian, had it right when he wrote that the chief practical use of history is to deliver us from plausible but superficial historical analogies. Or as Mark Twain more prosaically put it, the past may not repeat itself, but it rhymes.
Economy at 60-year low, says Darling. And it will get worse
Chancellor says Labour failing to communicate with voters
Nicholas Watt
August 30 2008
Britain is facing "arguably the worst" economic downturn in 60 years which will be "more profound and long-lasting" than people had expected, Alistair Darling, the chancellor, tells the Guardian today.
In the government's gravest assessment of the economy, which follows a warning from a Bank of England policymaker that 2 million people could be out of work by Christmas, Darling admits he had no idea how serious the credit crunch would become.
His blunt remarks lay bare the unease in the highest ranks of the cabinet that the downturn is making it all but impossible for Gordon Brown to recover momentum after a series of setbacks.
His language is much starker than the tone adopted by the prime minister, who aims to revive his premiership this autumn by explaining how he will help struggling families through the downturn.
The chancellor, who says that Labour faces its toughest challenge in a generation, admits that Brown and the cabinet are partly to blame for Labour's woes because they have "patently" failed to explain the party's central mission to the country, leaving voters "pissed off".
In a candid interview in today's Guardian Weekend magazine, Darling warns that the economic times faced by Britain and the rest of the world "are arguably the worst they've been in 60 years". To deepen the sense of gloom, he adds: "And I think it's going to be more profound and long-lasting than people thought."
The economic backdrop presents Labour with its toughest challenge since the 1980s. "We've got our work cut out. This coming 12 months will be the most difficult 12 months the Labour party has had in a generation," he says. But Labour has been lacklustre. "We've got to rediscover that zeal which won three elections, and that is a huge problem for us at the moment. People are pissed off with us.
"We really have to make our minds up; are we ready to try and persuade this country to support us for another term? Because the next 12 months are critical. It's still there to play for."
Darling was given a personal taste of the austere climate when ticked off by a waiter for ordering a second bottle of wine during a meal with his wife, Maggie, and another couple. "The waiter came over and said 'too much wine' in a loud voice. So we stuck to one bottle for the entire meal."
Darling admits that he was recently challenged at a petrol station by a motorist struggling with the rising cost of petrol. "I was at a filling station recently and a chap said: 'I know it's to do with oil prices - but what are you going to do about it?' People think, well surely you can do something, you are responsible - so of course it reflects on me."
But he has some words of comfort for Brown when he predicts there will be no leadership challenge against the prime minister. He also reveals that Brown has no plans to carry out an imminent cabinet reshuffle as he delivers a defiant put-down to critics who have said that he could be replaced as chancellor.
"You can't be chopping and changing people that often," he says. "I mean, undoubtedly before the end of the parliament he will want to do a reshuffle, but I'm not expecting one imminently. I do not think there will be a reshuffle."
Darling does not name names, but says some people want his job and have been trying to undermine him. Many in the Treasury believe that Ed Balls, the schools secretary, has been less than supportive. "There's lots of people who'd like to do my job. And no doubt," he adds, half under his breath, "actively trying to do it."
The chancellor's remarks about the economy - in an interview conducted over two days at his family croft on the Isle of Lewis - highlight the nerves at the top of the government after the loss of Labour's 25th safest seat in Britain in the Glasgow East byelection in July. The Tories are comfortably ahead in polls as leaders return on Monday after the holiday.
Darling, who speaks about how the prime minister is one of his oldest friends in politics, admits Brown has struggled to connect with voters. Asked whether Brown can communicate Labour's mission, he says: "Yes, I do think he can."
Asked why Brown has not done so, Darling falters as he says: "Er, well. Well, it's always difficult, you know ... But Gordon in September, up to party conference, has got the opportunity to do that. And he will do that. It's absolutely imperative."
Darling even describes himself as "not a great politician". Saying how he usually avoids personal interviews and photographs, he says maybe "that's why I'm not a great politician. You know, I'm not very good at looking at pictures and subjecting them to the equivalent of textual analysis".
Today's interview was designed to show the chancellor in a more personal light after a year in which he faced criticism over Northern Rock and the loss of discs with details of half the population. He says nothing of tensions with No 10 after he was reportedly rebuffed by Brown when he pointed out the dangers of abolishing the 10p tax rate.
His press adviser tells Darling, whose relations with Downing Street have been tense over the past year, to speak his mind in the interview. "Now Alistair," the adviser tells the chancellor as Decca Aitkenhead begins the interview. "Tell her everything. Make sure you tell her everything."
蚕蛹破茧成蝶，凤凰涅重生。
cán yǒng pò jiǎn chéng dié, fèng huáng niè chóng shēng
– A silkworm penetrates its cocoon to change into a beautiful butterfly; a phoenix after regeneration, is still alive.
Don't Let The Sun Catch You Crying
Don't let the sun catch you cryin'
The night's the time for all your tears
Your heart may be broken tonight
But tomorrow in the mornin' light
Don't let the sun catch you cryin'
The night time shadows disappear
And with them go all your tears
For the morning will bring joy
For every girl and boy so
Don't let the sun catch you cryin'
We know that cryin's not a bad thing
But stop your cryin' when the birds sing
It may be hard to discover
That you've been left for another
But don't forget that love's a game
And it can always come again oh
Don't let the sun catch you cryin'
Don't let the sun catch you cryin' oh no oh oh oh
Quake damage inflated, says cadre
Minnie Chan
Aug 31, 2008
Officials in a Sichuan town exaggerated damage reports from the massive May 12 earthquake to obtain more subsidies from the central government, a low-ranking cadre said yesterday.
The whistleblower also said he had been beaten up for trying to report the corruption.
Deng Yonggu , 33, a forestry officer in Gaosheng town in Pengxi county, said the township government had overstated the quake’s impact by saying that more than half of the town’s people were disaster victims and total damage amounted to as much as 9 million yuan (HK$10.3 million).
“Our town is more than 200km from the epicentre in Wenchuan and was just slightly affected by the shocks,” Mr Deng said. “None of the houses collapsed, not even the dilapidated buildings.”
However, he said town officials had reported that as many as 5,499 villagers in Gaosheng had been affected by the disaster.
“There are about 16,000 registered residents in our town, but at the moment only about 10,000 people live here, because many young people are working in cities,” he said. “Officials even made up 197 deprived and homeless victims to get 200,000 yuan in direct subsidies allotted by the State Council over the past three months.”
A protest letter signed by more than 300 residents of Gaosheng said the 197 villagers had been asked to pretend to be victims in return for payouts.
“Officials wanted them to sign documents to confirm they had each received 200 yuan in monthly disaster relief funds since June,” Mr Deng said. “But all 197 people later found that they were used.”
He had collected evidence of the deception and represented the residents in their attempts to report the corruption to higher levels.
“But none of the officials from the higher levels listened to me,” he said. “They even returned all the documents to my hometown. As a result, I was beaten up by town cadres who stormed my home at midnight on July 22.”
Mr Deng said villagers wanted the State Council to send inspectors to Gaosheng to investigate the alleged embezzlement.
“Residents are worried the central government is continuing to allot money to our hometown because officials claimed that they need millions of yuan to rebuild infrastructure,” he said.
“But we all know that local officials have a record of forging documents in past years to get subsidies.”
The National Audit Office revealed on Wednesday that about 258 million yuan in relief funds had been embezzled last year in 13 provinces, raising concerns over the management of trillions of yuan in disaster relief donations.
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