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Katherine Peavy

In Due Time: China’s business environment makes the case for due diligence

The South China Morning Post headline jumped out at me: Steel Princessstrading company in liquidation. I leaned a little closer to my neighbor on Hong Kong’s Star Ferry to read over his shoulder. The article claimed that liquidators were looking for about US$500 million that the company should have had in the bank. “Yes!”I mentally fist-pumped. Some people might view a missing half-a-billion as a failure, for me the headline meant success. I had investigated the CEO of Pioneer Iron and Steel, dubbed the “Steel Princess”by the press, on behalf of a client.

Fortunately, occasions when front-page headlines support the analysis in a due diligence report remain rare. On this occasion, the bankruptcy of Pioneer Iron and Steel leading to transfers of company assets from the trading company to other entities owned by the Pioneer Metals Group fulfilled the worst-case risk scenario in a due diligence report I’d given to a client a few years before. The largest risk, depending on what business the client planned to do with Pioneer, was that the corporate structure allowed for undocumented asset transfers. I never expected to see the exact risk we’d documented on the front page of a newspaper.

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Henry Yu

China’s Currency Reforms from a Banker’s Perspective

China’s Currency Reforms from a Banker’s Perspective: A Conversation with Henry Yu, Managing Director of Fifth Third Bank, Atlanta, Georgia.

Introduction

As China’s economy moves ever closer to surpassing the U.S. in terms of purchasing power GDP, China’s currency system seems incompatible with its global economic status. China’s new leadership led by President Xi Jinping is pushing to modernize and marketize the currency system along with necessary concurrent reforms. The 2008 financial crisis was a wake-up call for many countries, demonstrating the heavy dependence of the global economy on the U.S. dollar. The vulnerability of the U.S. economy became everyone’s challenge. Reform of the Renminbi (RMB) became a priority in order to establish the Chinese currency as a global player and lessen China’s reliance on the U.S. dollar. Aside from the fallout from the financial crisis, the sheer size of China’s cross-border trade is creating demand for far more depth and flexibility in the currency markets.

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Murphree

The China Standards Engine

MurphreeChina’s accomplishments in economic modernization, urbanization, industrialization, and science and technology are legion. The question to which China watchers, as well as the Chinese state, have now turned is how will China spur and sustain its future economic development? Research and media reports have shown that the low-wage, capital-intensive, and export-oriented strategies using China as a final assembly platform are providing diminishing returns. Future growth will be both slower and more difficult. China must therefore find new engines for economic progress.

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Jing Betty Feng

What’s Up with U.S. Big-Box Retailers in China? The Cases of The Home Depot and Best Buy

Jing Betty FengChina, with a rapidly increasing middle class, has drawn tremendous attention from foreign retailers and become one of the hottest markets in today’s global economy. By some measures foreign retailers have done well, even though Chinese retailers dominate the market. The number of foreign retail stores in the Top 100 increased faster than their Chinese counterparts in 2010, even though foreign retailers had slower sales growth compared with Chinese retailers (18 percent for foreign firms compared with 25 percent for Chinese retailers, according to a Deloitte report). Six major foreign supermarkets opened 135 new stores in 2010, up 22 percent over the previous year, and seven foreign retailers increased the number of their stores by more than 20 percent in 2010.

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