Direct Sales used to be banned in China in 1998. However, it was re-allowed again and has developed dramatically in the last decade (See Article from NYT). Several big brand of Direct Sales, such as Avon, Amway and Mary Kay, have recruited thousands, and even millions of sales consultant for their retail chain. Normally the business model comes with very low basic salary for the sales consultant. However, the reward could be attractive if one is able to achieve high sales volume. The entry level is quite low as almost anyone can join the sales network. Naturally there is a high rate of dropping out and losers, but the pyramid structure also rewards big to the top sales executive. More and more Chinese young men and women are joining the direct sales force to pursue their dream of being successful. Continue (继续)

China’s banks are likely to continue the loose lending policy in 2010, to a less extent compared to that of 2009 (See Article from WSJ). In 2009 Chinese banks lent a total of more than 9 trillion RMB new bank loans. IT is estimated that the same banks will likely lend up to 7-8 trillion RMB of new loans in 2010. Such a lowered level from 2009 is still quite high based on historical average. To achieve that target, most banks will likely need to raise more capital through equity market or debt market. A common concern of big scale of lending obviously is the increase of non performing loans. So far Chinese banks are in a healthy state regarding NPL levels (See Graph from Chinatells). According to the analysts, it is difficult to guess the level of bad loans. In fact, banks will never have increasing NPLs as long as the stock and property market are well performed, simply because that in a bull market no one is going to default. With a healthy outlook of economic growth, there are still room for banks to continue to keep the floodgate of credit open, Continue (继续)

China’s low consumption has been on the headline of newspapers recently. One of the perceived causes behind the low consumption is China’s high saving rate (See Graph from Chinatells). Naturally the next question is, why China has such a high saving rate, which makes investment so appealing. A lot of reasons have been put on the table, such as imperfect social security network, high education and medical cost, huge aging population that need to be supported, and high property price. In addition to above, there are also scholars to advise alternative views (See Article from Beijing Review). According to a recent study, in fact Chinese household’s saving rate has not increased but decreased relative to government and corporate. There seems to be a distortion of income redistribution from govenment and state owned enterprises to individuals. A striking finding is that some banks are lending money to big corporations at an interest rate lower than the deposit rate to individuals. Continue (继续)

The gossip that Chinese government is thinking of injecting 200 Billion USD fresh into CIC (See Article from Chinatells) seems to have stired some excitement in the market. The Chairman of ICBC, Mr. Jiang Jianqing recently voiced that China government should consider lending some of the foreign reserves to commercial banks for oversea investment purpose (See Article from WSJ). According to Mr. Jiang, such a release of foregin reserve to commercial banks benefit the government as the reserve could be used and invested more efficiently. In addition, it won’t increase the domestic money supply as the reserve will be strictly spent on the international market. On te contrary, it could drain the domestic money supply as the banks could do a swap with the government between RMB and USD. Continue (继续)