The European Commission said its plans would offer struggling businesses breathing space from creditors and stop value being destroyed by companies going to the wall.
“Insolvency should not always lead to the closing of the company and selling off the assets,” said Valdis Dombrovskis, a vice-president of the commission. “If the company is viable it should be given a second chance.”
The commission announced the move as part of a package intended to make legal systems less harsh on entrepreneurs, amid fears that some countries make it too difficult to shake off a failed venture and embark on new projects.
Vera Jourova, the EU’s justice commissioner, said that Brussels had seen clear evidence of unnecessary wealth destruction. “Every year in the EU, 200,000 firms go bankrupt, which results in 1.7m job losses,” she said. “Much of this could be avoided.”
Brussels has long been considering how Europe could mimic the benefits of Chapter 11 of US bankruptcy laws, a provision that is seen as taking the sting out of bankruptcy and promoting a more dynamic economy. The plans also draw inspiration from regulations in some EU countries that facilitate early corporate restructuring, such as the UK’s “schemes of arrangement”.
Under the EU proposals a business would be able to fend off winding-up orders from its creditors while it seeks to negotiate a voluntary debt restructuring. The protection would initially last four months but courts could extend it up to a year.
The new rules would also prevent a small minority of dissenting creditors from holding up restructuring agreements, with safeguards to ensure dissenters “legitimate interests” were protected.
Up until now Brussels has been cautious about incursions into insolvency law, where Europe has a diverse patchwork of national procedures.
While fund managers have said the lack of common EU rules in this area inhibits the growth of European capital markets, EU officials believe full harmonisation of national codes is a political impossibility.
Ms Jourova cited World Bank data indicating that, while in some EU countries, investors recoup on average 90 per cent of the money they put into a company that fails, in others the figure is as low as 30 per cent, showing that the availability of early, voluntary restructuring could make a substantial difference.
Brussels has also acted amid evidence of a weak entrepreneurial culture in some European countries. According to an EU survey, half of Europeans would not start a business because of fear of failure.
Another part of the commission plans would establish an EU-wide limit of three years when entrepreneurs would have to shoulder the debts from past failed ventures. Such limits currently vary widely between countries. The limit would not apply when a debtor “acted dishonestly or in bad faith”, the commission said.

by: Jim Brunsden 

Forecast

• Barring a decision to loosen government controls on credit, investment and home purchases, China's housing and construction sectors will slow in 2017.
• Industries that hold the bulk of China's outstanding corporate debt, including commodities, building materials and other sectors related to construction, will bear the brunt of a sustained housing slump.
• Sluggish construction growth and skyrocketing debt, coupled with sharp reductions in debt maturity periods, could cause corporate defaults and bankruptcies to spike next year, testing Beijing's legal and institutional abilities to cope with them.
• Meanwhile, increasing U.S. protectionism and other international developments could put even more pressure on the Chinese economy, forcing Beijing to trade its economic reforms for greater spending to keep the economy afloat. ​

AnalysisNext year is shaping up to be a decisive one for China's economy. In the eight years since the global financial crisis struck, the vitality and importance of low-cost exports — the kind the Chinese economy used to rely on — have steadily declined. Scrambling to prop up the country's growth and protect its near-universal employment, China's leaders have embraced monetary and fiscal stimulus measures, causing the country's outstanding debt to balloon to almost 250 percent of gross domestic product. Corporate debt, by far the largest share of China's total debt, has likewise surged by more than 60 percent to top 165 percent of GDP. Now, a nationwide debt crisis looms at Beijing's doorstep amid business defaults and bankruptcies, low industrial profits, winnowing returns on investment and the very real prospect of yet another slowdown in the real estate sector. How well Beijing manages these problems in the months ahead will, to a great extent, determine China's economic, social and political stability for years to come.
A Deepening Debt CrisisChina's economy has always depended heavily on investment into fixed assets such as roads, railways and apartment complexes. But over the past decade, as cheap exports' share of the economy has collapsed and as household consumption has continued to slide, this investment has become one of the primary drivers of economic growth and employment in China — and, by extension, a cornerstone of its stability. That much of China's fixed asset investment comes from the country's biggest state-owned banks (including the "Big Four," which answer directly to Beijing) not only highlights its importance as a policy tool but also explains why Chinese leaders have wielded it so liberally to offset weaknesses in other areas of the economy.
Of course, the funds for such ample investment have to come from somewhere, and over the years Beijing has gotten them through many different means. From slashing benchmark interest rates and bank reserve requirements to boosting domestic equity markets and direct spending, the Chinese government has paid for its purchases in several ways. The vast majority of Beijing's investment, however, has been financed by debt, whether in the form of loans, bonds or other types of formal and informal lending. Most has come from state-owned banks: In 2015, outstanding bank loans equaled 141 percent of GDP, while outstanding bonds totaled 63 percent of GDP. Whereas countries such as the United States and Japan tend to spur growth by stimulating equities or hiking government spending, China has used its control over the banking sector to shape the cost of capital and determine where and how fast it flows. Unsurprisingly, the lion's share of the money has been funneled into China's immense state-owned enterprises, which largely explains why they hold an outsize share of the country's corporate debt. (State-owned companies account for over 55 percent of that debt, despite contributing only 20 percent of GDP.) It also explains why, by comparison, China's central government has an unusually low level of debt. (Beijing's debt equaled only 22 percent of GDP in 2015.)

Not long after the 2008-09 financial crisis hit, it became clear that China's supposedly temporary stimulus package was, in fact, the start of a prolonged period of investment-led growth. Local government debts, which at the time were deemed the biggest source of systemic financial risk to the country, became a serious cause for concern. This had less to do with the size of local government debt, which never exceeded 40 percent of GDP, than it did with its opaque management. After all, almost all local government debt was borrowed and invested by pseudo-corporations known as local government financing vehicles that had no assets or functional management structures whatsoever.
By 2013, Beijing had started to crack down in earnest on wasteful local spending, forcing most of these pseudo-corporations to close their doors. Beijing simultaneously rolled out fiscal reforms designed to reduce local governments' reliance on debt to pay for their basic infrastructure needs. Included in these reforms was a program that allowed local governments to swap their debt for cheaper, longer-term municipal bonds. The program, which has grown rapidly since mid-2014, has partially eased fears of a local debt crisis emerging, even if it has not solved the underlying problem — a lack of transparency — that will continue to make local government debt a financial risk. But with the debt-swap initiative and other measures in place to help cities and regions pay off their loans, local debt is unlikely to be the main source of China's economic woes next year.
China's Crumbling CorporationsInstead that role will likely fall to corporate debt, especially that held by companies in the heavy and construction industries, many of which are state-run. China's biggest borrowers — property developers, oil and natural gas companies, power utilities, metals and mining companies, and construction and engineering firms — together account for at least 60 percent of the country's outstanding corporate debt and are among its most highly leveraged firms. According to Bloomberg, China's heavy industry, building materials and utilities businesses have average debt-to-equity ratios as high as 85 percent, 120 percent and 130 percent, respectively.
This is a problem for a number of reasons. With the exception of the energy sector, all of these industries are extremely reliant on construction related to real estate, which is thought to account for between 15 and 25 percent of China's GDP. Home prices and, to a lesser degree, real estate construction and investment have fared unexpectedly well this year. (In 2014-15, nearly every real estate indicator pointed to a sectorwide downturn in 2016.) Yet even though more new construction projects have sprung up in 2016 than predicted, the pace of actual construction has continued to crawl. Meanwhile, investment into small residential units — houses of less than 90 square meters (about 970 square feet), which make up the biggest share of investment in residential property — has dropped by 0.8 percent since 2015, even as investment in larger residential units has risen. And after three consecutive quarters of record-breaking growth in home prices in China's biggest cities, Beijing has quietly begun to pressure local governments into curbing home purchases and property speculation. These measures have already started to weigh home prices down in the country's high-demand housing markets, and they will likely keep declining in the months ahead unless Beijing reverses its policies.

So, although 2016 has brought stronger-than-expected growth to China's property sector, it has largely been concentrated in the country's wealthiest cities and has come at the expense of creating more available credit. At the same time, this growth has had uneven effects on real estate investment and construction. Individually, each of these factors suggests that credit is becoming a less and less efficient means of driving growth in the construction sector, which will limit Beijing's options in monetary and fiscal policymaking in 2017. But combined with what appears to be a push by Beijing to limit increases in home prices — which will put an even bigger drag on real estate investment and construction — the future of China's housing sector looks grim.
For most of China's deeply indebted companies, another protracted slump in the housing sector could be catastrophic. On top of their climbing debt-to-equity ratios, Chinese housing and construction firms have seen the maturity periods of new debt shrink over the past few years. Now, Chinese enterprises are issuing far more short-term debts than they did before: In the third quarter of 2016, 82 percent of all Chinese corporate bonds had maturities of less than three years, compared with just 36 percent in the same quarter of 2010. (The picture is even grimmer in the construction sector itself.) In other words, more and more Chinese businesses are taking out loans to repay existing debts, rather than to fund long-term investments.
Combined with tighter controls on home-buying and heftier debt burdens, this deepening dependence on short-term loans all but guarantees that more Chinese companies in construction-related industries will default on their debts or declare bankruptcy next year. And because many of these firms are concentrated in northern and central China, these regions will suffer a disproportionate share of the economic and social consequences.
Chinese authorities are not blind to these risks, and they have unveiled several measures aimed at mitigating the worst of the danger. Chief among them are a debt-for-equity swap program, as well as a plan to create special bankruptcy "tribunals" to facilitate corporate bankruptcies and restructurings, which have doubled in 2016 compared with the year before. But it remains to be seen just how effective these solutions will be. So far, the debt-for-equity swap program has been implemented only on an ad hoc basis, and many banks have reportedly balked at the idea of trading loans for stakes in failing companies, casting doubt on whether Beijing can get the buy-in it needs to make its initiative work. Furthermore, China has little real legal infrastructure for handling bankruptcies, and its dearth of expertise will almost certainly limit how quickly courts can process the corporate bankruptcies piling up in the months ahead.
A Year of Uncertainty AheadWithin China's borders alone, there are plenty of reasons to expect Beijing to have trouble making good on its plans to tighten credit and restructure Chinese corporations in 2017. Too many companies are in too dire of financial straits and are too dependent on housing and construction, not to mention that China's legal and institutional infrastructure is still in its infancy. But there is also an external factor that will make economic reform in China more difficult: U.S. President-elect Donald Trump's promise to impose sweeping tariffs on imports of Chinese goods.
During his presidential campaign, Trump vowed to enact a 45 percent tax on all Chinese products. Though political and economic realities will undoubtedly keep him from fully fulfilling that pledge, even targeted tariffs on specific goods could do real damage to China's economy. For instance, a tax on Chinese steel exports to the United States, which account for roughly one-tenth of China's total steel and steel products exports, could leave Beijing with little choice but to backpedal on its cutbacks on home purchases and domestic spending in an effort to bolster its building materials sector. At the very least, it would also put a crimp in China's enduring struggle to overhaul and consolidate inefficient businesses in heavy industries such as coal and steel. Though Chinese President Xi Jinping has made a clear commitment to moving away from the country's current model of using investment to fuel growth, that commitment depends in part on economic stability in the rest of the world.
With or without punitive U.S. trade measures, 2017 is gearing up to be a difficult year for China. Though the Chinese economy's biggest challenges come from within, external developments — whether the policies of the next administration in Washington or an unforeseen crisis in Europe — may bring those internal problems to a head. And as the new year begins, China's leaders will be on their guard as threats to the country's social and economic stability mount.
Lead Analyst: John Minnich

Understanding Samsung’s Current Automotive Business
Samsung has long been trying to find a silver bullet to penetrate the automotive market. In the meantime it has been taking a more competence-driven approach.

• With over 30 percent market share in the memory business across memory chip, DRAM and NAND flash, Samsung is taking this business into the automotive space. In late 2015, Samsung announced a partnership with Audi to supply it with its latest memory products including 20-nanometer LPDDR4 DRAM and 10-nanometer class eMMC 5.1 to Audi’s future IVI systems, central dashboard and ADAS applications. This was the first big foray of Samsung as an automotive electronics component supplier.
• Earlier this summer, Samsung announced an automotive aftermarket connected device play in partnership with AT&T. Dubbed “Samsung Connect Auto”, this device plugs into the OBDII port available on cars manufactured after 1996 and provides features such as a Wi-Fi hotspot that allows over 10 customer devices to be connected and also provide diagnostics alerts, maintenance reminders and geo-fenced alerts. Samsung is not alone in this game in the US and has competition from startups like Zubie, Mojio, Automatic and other wireless carriers Verizon and T-Mobile who have launched their own aftermarket plug and play devices as well. This has been viewed as an extension of the Samsung IOT universe and more a strategy to achieve volumes.

What Does Harman Add to the Equation?
Harman offers premium branded audio systems and solutions to vehicle manufacturers. The company operates under four business divisions: its connected car unit caters to the navigation and infotainment requirements of OEMs, lifestyle audio provides branded premium audio options for automakers to consumers, professional solutions and the newly formed cross-industry connected services unit. The most recently released financial results from Harman for the first quarter of 2017 puts the combined share of connected car and lifestyle audio at 76.9 percent of the overall sales, both combined that accounts for a lion share of the auto OEM business. In terms of clients and working relationships every vehicle manufacturer ranging from Ford, GM, and Fiat – Chrysler  to Subaru, Toyota, Lexus to Mercedes-Benz, Audi, and BMW have a long history with Harman. The solutions that Harman delivers to key auto clients include:

• Premium branded audio solutions that include an array of brands ranging from Bowers & Wilkins, Harman/Kardon, JBL, Infinity, Lexicon, Mark Levinson; Revel to the most recently acquired Bang & Olufsen’s automotive audio division. In addition to delivering the audio experience, Harman also specializes in a wide array of advanced software solutions that add to the overall premium audio experience like Halosonic advanced noise reduction. Harman works with almost every OEM on the market for their premium audio solutions and covers about 35 percent of the global market.
• Scalable infotainment systems that include embedded connected navigation starting with high-end to currently focusing on mid and low tier solutions as well. Harman was the industry first supplier to work on a modular infotainment system dubbed MIB that is currently in generation 2 delivered to Audi models worldwide. Harman is continuing to innovate on this space using key areas like learning navigation systems, 3D and augmented reality overlay, third party apps, multimodal HMI interface and cloud-based connected services through its newly formed connected services business unit.
• Harman is also increasing its focus on the telematics business focusing on connected TCU’s and adding the V2X focus on this. Daimler is one of the biggest clients Harman has in this space.
• Through the acquisition of Towersec and Red Bend and using internal capabilities, Harman is one of the frontrunning tier 1 suppliers to have a very detailed cybersecurity framework to support automotive OEMs. Dubbed the 5+1 security framework, this piece allows Harman to support from an end to end cyber security implementation perspective and also add the over the air updates component to it.
• Focused on automotive and other markets, the recently set up connected services business unit that resulted from acquisitions brings several capabilities ranging from cloud, analytics, mobility, OTA, IOT to design and embedded providing services ranging from supporting companies in its digital transformation efforts to managed IT services and predictive analytics offerings. This is a whole new software play from Harman trying to create an IOT focused entity to generate additional revenues and not just focus on the hardware side of the business.
• Harman is also focusing on increasing its presence in the Advanced driver assistance systems (ADAS) space after its acquisition of a small Israeli firm called iOnRoad developing surround view applications, showcasing industry first pupil-based driver monitoring systems and increasing its efforts on the heads-up display space.

Clearly, the advantage for Samsung is to get access to a supplier that is rooted in business with vehicle manufacturers and is focusing on expanding its reach with them on some of the key areas such as connected car, ADAS, Cybersecurity and OTA, all of which are necessary toolkits for a massive number of OEMs.
The Road Ahead – Samsung Will Benefit From This New Growth Driver
Samsung was clearly in need of a new growth driver given the setbacks it has faced in the smartphone business recently and the shrinking margins in this space. Compared to competitors in the technology domain like Google, Apple and even LG, the company has been late to set up a clear strategy for the automotive market. As an example, LG has transcended beyond just batteries to being a key supplier for the upcoming Chevrolet Bolt that includes subsidiaries like LG Chem, LG Innotek, LG Display and LG Electronics. The acquisition of Harman and thus its official foray into the automotive business plays well for several reasons:

1. Samsung will gain access to a largely high margin automotive business through Harman that has predominantly been focusing on the high end of the audio and infotainment segments. And since the infotainment and connected navigation business are projected to grow at a higher rate than the overall industry, this will provide ample room for growth.
2. Recent acquisitions made by Samsung across the artificial intelligence, cloud services, connected home and most recently Harman gives a complete IOT framework that will be crucial from a connected industries perspective. This, in addition with Samsung’s recent announcement that it’s setting up a team internally to focus on processor chips for autonomous cars (rumored to be a task force from the LSI division that makes non-memory chips powering camera image sensors), creates an overall powerhouse that can take a larger electronics role in autonomous vehicles for vehicle manufacturers. With many car companies hesitant in working with Google due to various reasons, and Apple choosing to focus its efforts more in-house currently, Samsung could quietly creep up to becoming a key supplier here.
3. Samsung’s take over could also mean that Harman has a chance to grow its footprint into the ever increasing ADAS and automated driving angle. While Samsung currently focuses more on memory chips and Harman is giving initial shape to its ADAS applications roadmap, timing could be right to accelerate the development of robust features and also be the underlying component suppliers for the same.
4. Samsung is getting ready to bet big on Tizen as an OS for its lower-end handsets lessening its dependency on Android. With Samsung Connect Auto the aftermarket solution, the company is already delivering a Tizen OS based product to the auto market. With the acquisition of Harman, Samsung will find another key market for Tizen adoption and thereby also increase chances of developers getting interested in the platform because of increased volumes. Samsung, in an effort to boost developer participation, launched a $9 million program with $10,000 incentive per app for developers to develop apps on Tizen. The success of this could prompt a slow shift away from Android even if it won’t happen in the short to medium term atleast on the higher end of its smartphone and other markets.
5. Samsung acquired a 2 percent stake in BYD, money that BYD is pumping into battery production and R&D on electric vehicles. Samsung has already invested about $350 million in a battery plant near Budapest with a capacity of supplying cells for about 50,000 cars a year. Given these two moves to take a bigger stake in the battery side of the EV business that has been a challenge for mass adoption and cost, Samsung is also betting big on the EV side of the automotive evolution. With Harman’s acquisition, the company has created a presence in literally every growing segment of the automotive market.

This article was written with contribution from Praveen Chandrasekar, Head of the Connected Car program at Frost & Sullivan.  

Sarwant Singh ,  CONTRIBUTOR

When life gives you oranges, don't spill them along a highway.

A truck driver and his nephew were attacked by a group of villagers as the pair tried to stop the group looting their spilled cargo of oranges after their vehicle overturned on a highway in eastern China on Sunday (Nov 6), reported the South China Morning Post.

The driver wept by the road as villagers scrambled to pick the oranges off the road in Yichun, Jiangxi province, news portal Kankannews.com reported.

Villagers living nearby had dashed to the scene after the truck spun out of control and overturned, spilling the fruit across the highway, the report said.
However, they had not come over to help the pair.
​
The driver and his nephew, who were transporting the oranges from Hunan province, tried to stop the villagers from picking up the fruit. However, the pair were beaten up, as seen in the video footage circulated online.

Powerless to stop the looting, the driver squat by the side of the road and wept.

The villagers only left the scene after police officers intervened. It took the officers and the driver the whole afternoon to clear the remaining oranges and clean up the area.

The driver wept as he told reporters about the incident. It was his first long distance trip delivering fruit and he had borrowed money to buy the vehicle.
​
The total value of the oranges was over 10,000 yuan (S$2,076) and the driver waited five hours before his truck was towed away.

PUBLISHED NOV 11, 2016, 9:18 AM SGT - straitstimes.com

A new report predicts major retail container ports will see a 4.4 percent increase in imported cargo volumes this month ahead of the holidays.

The monthly forecast from the Global Port Tracker also indicates that December "should see a slightly larger increase" in retail imports than the November projection. The report, issued by the National Retail Federation and Hackett Associates, also pointed out that cargo volumes for ports covered in the survey rebounded in October after showing a decline in September.

"Retailers are importing more during the holidays this year than last year and that can only mean one thing – they expect to sell more," Jonathan Gold, the federation's vice president for supply chain and customs policy, said in a statement. "Most of the holiday merchandise is already here, but retailers are still restocking to be sure shoppers will have a broad and deep selection as they hit the stores over the next several weeks."

Telsey Advisory pointed out in a research note Tuesday that promotional discounting tied to the holidays has already started and indicated that inventories appear to be "much leaner in the department store channel compared to last year."

Cargo volumes for the full calendar year are expected to be up 2.2 percent from a year ago. It follows the first half of 2016 with a slower 1.6 percent pace in volumes when compared with the year-earlier period. The monthly tracker covers about a dozen ports, including Los Angeles, Long Beach and Oakland, California, and New York/New Jersey and Miami.

Overall, the federation is still forecasting holiday sales will be up 3.6 percent this year when compared with last year. That is above last year's increase of 3 percent but could prove to be overly optimistic given recent softness in the retail space.

JPMorgan analyst Christopher Horvers said in a note Tuesday that some weak retailer results have raised concerns about the overall consumer retail environment. "If the consumer doesn't bounce post-election, we worry that this late cycle weakness looks more like a recession," he said.
The latest tracker forecast also sees monthly cargo volumes moderating in early 2017. It predicts February cargo volumes will fall 3.2 percent from the year-earlier period after a forecast for January's 3.6 percent growth.

According to Hackett Associates founder Ben Hackett, U.S. imports continue to grow but at a slower pace than in past years.

"Despite all the good economic news recently, we are faced with imports growing only about 2 percent this year," he said in a release. "Whether that is merely part of the aftermath of the Hanjin bankruptcy or a sign of weakening demand is not yet clear. Unless there is a major disruption, however, growth should be modest but sustained during the first half of 2017."

​Jeff Daniels | @jeffdanielsca
Tuesday, 8 Nov 2016 | 6:46 PM ET