Wednesday's Top 10 with NZ Mint: China's finance company-like shadow banks struggling; Greece's non-solution; America's rolling debt trainwreck; Jon Stewart and a turkey; Dilbert

Here's my Top 10 links from around the Internet at 11 am today in association with NZ Mint.

As always, we welcome your additions in the comments below or via email tobernard.hickey@interest.co.nz.

See all previous Top 10s here.

My must watch is #8 from Satyajit Das on the US debt debacle.

1. China's finance companies - WSJ reports on how some loans to investment trusts in China are going sour.

This is China's shadow banking sector.

It is very similar to our own finance companies.

More speculative privately owned property development and factory businesses borrowed money from these trusts at a rapid rate in the last three years.

Now the capitalising loans are going bad...

Sound familiar?

Here's WSJ with the details of a farmer turned entrepreneur and coal miner, Wang Pingyan, who managed to borrow US$800 milllion.... Sigh

The farmer-turned-entrepreneur figured that to stay in business, he had to get bigger, say former employees and others familiar with his business. Since state-owned banks were reluctant to lend to him—a common problem for private businesses in China—he turned to private investors. In total he raised about 5 billion yuan ($794 million), according to these people.

Three years later, Mr. Wang is in financial trouble. The price of coal has plunged by 20% since early last year, causing him to default on several of his loans and landing him in detention.

Mr. Wang's case highlights the hidden risks to banks from their links to China's fast-growing "shadow-finance" industry, a term for all types of credit outside formal lending channels.

Shadow finance in China totals about 20 trillion yuan, according to Sanford C. Bernstein & Co., or about a third the current size of the country's bank-lending market. In 2008, such informal lending represented only 5% of total bank lending.

2. The problem with the pursuit of shareholder value - Here's Schumpeter at The Economist on doubts about the multi-decade drive for shareholder value at all costs.

Mr Polman was one of several titans to decry the cult of shareholder value at the Peter Drucker Forum (an annual gathering of admirers of the late Austrian-born management guru) in Vienna on November 15th and 16th. Roger Martin, the dean of the Rotman School of Management at the University of Toronto, called it a “crummy principle that is undermining American capitalism”. Georg Kapsch of the Federation of Austrian Industries urged the world to abandon it. Rick Wartzman, the director of the Drucker Institute, said its critics were gaining momentum.

The cult has certainly yielded perverse results. The fashion for linking pay to share prices has spurred some bosses to manipulate those prices. For example, a manager with share options gets nothing if the share price misses its target, so he may take unwise risks to hit it. Short-termism is rife on Wall Street: the average time that people hold a stock on the New York Stock Exchange has tumbled from eight years in 1960 to four months in 2010. The emphasis on short-term results has tempted some firms to skimp on research and innovation, robbing the future to flatter this year’s profits. “Long-term results cannot be achieved by piling short-term results on short-term results,” Drucker once remarked.

3. Pot calls Kettle black - Reuters reports on China's criticism of other countries starting currency wars to 'beggar thy neighbours'.

"We, together with many other countries, have been critics of this irresponsible and beggar-thy-neighbor policy," China's deputy permanent representative to the World Trade Organization, Zhu Hong, said, referring to the monetary stimulus policy often shortened to QE.

"It has a lingering negative impact on developing, emerging economies in particular," Zhu said during a debate on currency fluctuations at the WTO in Geneva, according to a transcript provided by a Chinese official.

The meeting was called to discuss Brazil's proposal that WTO rules should include a system for dealing with currency misalignments.

4. What Xi Jingping is up to -  Caixin reports on growing moves in China to force officials to declare their families' private assets as part of a broader crackdown on corruption.

5. Chinese Ice Angels - Here's an interesting Xinhua story on the Chinese Ice Angels, an offshoot of the Icehouse in Auckland trying to encourage Chinese investment here.

Given the controversies surrounding its investments in the past year, many Chinese investors are now keeping a low profile, investment facilitator and Chinese Ice Angels volunteer Kenneth Leong told Xinhua.

He had three pieces of advice for Chinese investors in New Zealand: build trust first, understand New Zealand's "rules of engagement" in business, and rely on advisors with experience in the market.

Likewise, New Zealand businessmen should learn at least "a little bit of Mandarin" and something about Chinese culture to demonstrate "that you're trying hard and you're genuine."

"It takes time to build trust and to actually have understanding both ways understanding what each side wants," Leong said. "I would envisage that it would take a while for there to be traction."

6. Australian recession - Denmark's Saxo Bank has forecast a recession in Australia in 2014.

7. Our dollar but your problem - Satyajit Das has written an excellent summary of America's debt problems and what they mean for the rest of the world.

Debt monetisation (printing money in popular parlance) will continue, entailing the US Federal Reserve purchasing government bonds in return for supplying reserves to the banking system.  Zero interest rates policy (“ZIRP”) in conjunction with debt monetisation will be used to devalue the US dollar.

As the US dollar weakens it improves America’s external position. US foreign investments and overseas income gain in value. But the major benefit is in relation to debt owned by foreigners.

As almost of its government debt is denominated in US dollars, devaluation reduces the value of its outstanding debt. It forces existing foreign investors to keep rolling over debt to avoid realising currency losses on their investments. It encourages existing investors to increase investment, to “double down” to lower their average cost of US dollars and US government debt. As John Connally, US Treasury Secretary under President Nixon belligerently observed: “Our dollar, but your problem.”

8. What the Greek deal really means - Here's Ed Hugh's view. The latest deal is no real solution.

9. Here's your container - The Daily Mail reports on moves to set up containers in back yards to house the elderly...

10. Totally Jon Stewart on Barack Obama pardoning the turkey.