On Feb 2, Fitch has downgraded two Chinese banks – China Merchants Bank and Citic Bank to D, which means ‘weakness of internal or external origin’. Before the downgrade the two banks were ranked C/D, which means ‘adequate but with one or more trouble aspects’. Such a downgrade has invited strong reaction from a senior bank official of People’s Bank of China (See Article from WSJ). According to the official, Chinese banks have weathered financial storm well and came up in better shape than any other western banks (See Graph from Chinatells). Therefore Fitch’s rating is not objective. In addition the capital adequacy ratio of the two banks is good enough and their NPL ratio keeps going down. However the record amount of increase in loans in ’09 did post potential risks to the banks, albeit not that clear for the moment.

美国评级机构Fitch近日调低招商银行和中信银行的评级，从C/D降到D。此举引发央行高管的不满。从08年金融危机以来，中国银行受到的冲击最小，在走出危机的过程中一马当先，远远胜过美国同行，因此最近的降级难以让人信服。

China is the world’s largest potential market for almost every thing, from baby milk to cars, from computer software to internet service. However, not every company with an intention to make a fortune in China ends up in happiness, despite how successful they are outside China. Google is such an example. Google never had a smooth road in China since its entry. It was tied to an incidence of showing porn related content (See Article from Chinatells), and the CEO of Google China resigned to set up his own fund (See Article from Chinatells). Now Google China is having more headache with a site attack from China and the management seems desperate therefore threatens to quit (See Article from Yahoo).  I doubt Google is serious about quiting China as they simply can not afford to lose this market due to strategic and competition reasons, even though currently China only contributes a tiny portion of Google’s global revenue. Continue (继续)

China’s Steel Industry is still fighting hard against the potential merging between Rio Tinto and BHP (See Article from WSJ). China is the world’s biggest iron ore importing country, acounting for more than half of the total tradable volume. Unfortunately the world supply of iron ore is concentrated in some of the biggest mines such as Vale (33%), Rio Tinto (19%) and BHP (17%). If the merge between Rio Tinto and BHP goes through, the combined company will no doubt have the biggest market share of iron ore supply and Chinese importers will be in a very weak position to negotiate contract price. The steel companies are doing everything they can to resist the structual change on the other side and seek alternative supplies. Continue (继续)

German car makers are apparently leading their way in the luxury car segment, particularly in China (See Article from WSJ). Daimler AG sees the sale of its core brand, Mercedes, to increase by three fold in China in 2009. The other two big luxury makers, Audi and BMW, also see their sales to increase by more than 40% respectively in China. China has surpassed USA and became the second largest new car sales market in the world, almost equivalent to EU (See Graph from Chinatells). When a man has money, the first thing that he will spend money on is probably a car (let’s say a Toyota or Nissan?). When he has a little bit more money, then comes the Big German Three? I think eventually to own a BMW or Mercedes is probably a wish for most middle class man – it is like a Gucci or LV bag – you have to have one! Continue (继续)