You know you’ve reached the summit of diplomacy when animals become accepted goodwill currency. China is giving Taiwan two pandas and will receive deer and Formosa serow, a native Taiwanese antelope-like creature, in return. We don’t know what the going rate is for a couple of pandas, but it wasn’t enough to stop tens of thousands of pro-independence demonstrators from taking to the streets in Taiwan.
Corporate China could do with a healthy stock of wildlife to win brownie points with investors but, ultimately, there is no substitute for cold, hard cash. Guangzhou R&F knows this all too well. With its domestic share offering on hold, the company will issue bonds to raise much-needed capital. The pain being felt in the real estate market is being passed down the supply chain – fewer buildings means less demand building materials. This appears to have undone FerroChina, where creditors are busy sizing up assets in order to regain some of the money they lent the soon-to-be-defunct steelmaker.
China’s export sector has become all too familiar with companies going under and the recent sharp rise in the renminbi against the euro is expected to make things worse. In these turbulent times, companies need cash flow and, having taken steps to facilitate lending by domestic banks, China has now turned its attention to foreign lenders. A US-style Term Auction Facility may be introduced to keep these financial institutions solvent. But don’t misinterpret this as China coming to the world’s aid. According to the vice minister of foreign affairs, China’s focus at the upcoming economic summit in Washington will remain firmly on the interests of developing countries.
