China

Foreign and domestic investors are preparing to pounce on bad debts held by Chinese banks—a potentially lucrative but risky area that has disappointed investors in the past, The Wall Street Journal reported. Specialist investors are starting to raise funds on the expectation that the country's lenders, under pressure to improve their balance sheets, will soon sell nonperforming loans. Distressed-debt investors buy bad loans from banks at a fraction of the amount the banks originally lent.

The breadth of a plan to narrow the gap between rich and poor, and the fact that it came out at all, heightened the sentiment that China's leaders may be ready to take on powerful interests quickly rather than laboriously trying to reach a broad consensus first, The Wall Street Journal reported.

China has pledged to increase minimum wages and force state-owned companies to hand over more of their revenues to the public as part of a push to tackle growing inequality, the Financial Times reported. The chasm between China’s rich and poor is seen by analysts as a significant threat to political stability, with discontent over inequality spilling over into angry online comment and, on occasion, street protests. Unveiling a 35-point plan on Tuesday, the State Council, or cabinet, said it wanted to lift as many as 80m people from poverty by 2015.

China's banks and other lenders have extended hundreds of billions of dollars to Chinese companies over the past two years, helping them weather sluggish foreign demand in many industries as well as slowing growth at home, The Wall Street Journal reported. Analysts at Standard Chartered PLC estimate that Chinese corporate debt was equivalent to 128% of gross domestic product by the end of 2012, up from 101% at the end of 2009.

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.

China is losing its competitive edge as a low-cost manufacturing base, new data suggest, with makers of everything from handbags to shirts to basic electronic components relocating to cheaper locales like Southeast Asia, The Wall Street Journal reported. The shift—illustrated in weakened foreign investment in China—has pluses and minuses for an economy key to global growth. Beijing wants to shift to higher-value production and to see incomes rise. But a de-emphasis on manufacturing puts pressure on leaders to make sure jobs are created in other sectors to keep the world's No.

China's local governments ramped up their efforts to borrow in 2012, raising concerns that the rebound in growth in the world's second-largest economy has come at the expense of increasing financial risks, The Wall Street Journal reported. China's local governments borrowed big in 2009 and 2010, taking debt levels to around 10.7 trillion yuan ($1.7 trillion), according to government data, as they financed a huge infrastructure stimulus. That led to worries among some economists that hidden debt problems could trigger instability in China's banking system.

China’s bank loans as a share of funding in the economy may have fallen to a record low, highlighting the growth of alternative financing channels that have prompted warnings of rising credit risks. New yuan loans probably dropped 14 percent last month from a year earlier, according to the median projection in a Bloomberg News survey of 37 analysts ahead of data due by Jan. 15. That would give bank lending a 55 percent share of aggregate financing for 2012, based on UBS AG estimates, the least in figures dating to 2002.

China's average home prices rose in December, ending eight straight months of year-on-year declines, signaling the country's property market is recovering from its lengthy slump, the Wall Street Journal reported today. A survey of property developers and real estate companies showed the average price of housing in 100 Chinese cities rose by a modest 0.03 percent in December from a year earlier, data provider China Real Estate Index System said Friday.

China has issued a fresh warning to its local governments to control risk and stop using unauthorized fundraising methods to pay for the building of infrastructure and other projects, the Wall Street Journal reported today. The finance ministry, in a statement jointly issued with other government agencies and published on its website Monday, said there has been an increase of unauthorized funds by local governments and reiterated existing restrictions on the use of leasing, trust, and build-and-transfer arrangements to pay for public works.