By Michael Raffety
I’ve written about the huge hoard of aluminum shifted from Mexico to Vietnam by
China’s Zhongwang Holdings Ltd., amounting to 14 percent of the aluminum in the world.
But the world’s biggest producer of aluminum is China’s Hongqiao Group Ltd. That company, employing 60,000, is facing fraud allegations from two short sellers and is feuding with its accountant over the fraud allegations. An April 15 article in the Wall Street Journal by Scott Patterson in London and Brian Spegele in Beijing refers to complaints by American companies of “unfair tactics” and “could also reinforce the broader concerns over what many view as questionable business practices by China’s industrial giants…”
Hongqiao complained to the Chinese Non-Ferrous Metals Industry Association, “saying the short sellers’ claims of inflated profits were forcing the company’s accountant, Ernst & Young ‘to adopt an extremely conservative and careful attitude,’” Patterson and Segele wrote.
“Conservative and careful?” That’s the very definition of accountants. Nobody, at least in America, wants an accountant to be wild and careless.
Ernst & Young suspended its 2016 audit, asking the company to commission an independent investigation of the short sellers’ claims. Without an audit Hongqiao could be investigated by the Hong Kong securties regulators and its credit rating has already dropped into junk status, putting at risk its $10 billion in debt, already $700 million of that facing default without relief from the creditors.
On Feb. 28 Emerson Analytics issued a report accusing Hongqiao of “abnormally high profits” resulting from underreporting producing costs.
. . .
Maybe China can control its bubble economy and maybe it can’t. Here’s an item from the April 1 Wall Street Journal: “Total credit in the Chinese banking system is now 106 percent of deposits, up from 80 percent in 2013. For midsize banks it’s 130 percent.”
From the March 30 WSJ comes the information that Chinese “banks and other financial institutions borrowed $6.4 trillion from each other last month.”
Uncollateralized interbank lending in China totaled $34 trillion last year. Chinese banks are selling “wealth management products” to customers that are backed by largely opaque bundles of debt and assets leveraging “everything from government bonds to garlic.” Now here’s a bet that will ward off vampires and the evil eye.
The nickel summary is Chinese businessmen and women work hard and take chances. Some of them pay off and some of them wind up being kind of shaky, even shady.
. . .
On a completely different subject, the state is trying to steal our water. It was only recently that the governor lifted the drought declaration. Never forget that Gov. Jerry Brown is a lawyer and a former monk. Only he could think of a way to get around the state Water Code and the state Constitution.
He is doing that by “making conservation as a way of life.” There are several bills that his minions in the Legislature are using to implement that scheme by empowering the state water board to impose permanent conservation on all of us by limiting our daily consumption to 55 gallons of water inside and 55 gallons outside.
Look at your EID bill and you will see where it identifies you daily water consumption. The only way I would get down to 55 gallons a day is to eat off paper plates and take out laundry to the laundramat.
That’s not the only way the governor is going to grab senior water rights, such as EID’s which date to 1850 and 1851. The State Water Resources Control Board wants water districts to release “unimpaired flows” from February through June. That would leave EID with not enough water to serve its customers.
For water purveyors throughout the state it is a year of living dangerously as they all battle back against the legislative onslaught.