US-Owned Cruise Lines: Guaranteeing Misery at Sea

♠ Posted by Emmanuel in at 1/29/2014 01:02:00 PM
So many people to poison, so little time
American air lines and cruise lines are renowned worldwide for their absolutely abysmal standards (if they have any). There is nothing as soul-destroying as taking a flight on American, Delta, United. US carriers are rightly regarded as utter garbage by global standards, and these purveyors of human misery will never win any global travel awards.

Not content with immiserizing American flyers, Yanquis dabbling with the travel industry have expanded operations to cruise lines. Carnival Cruise Lines are famous for sickening passengers on their pile 'em high and sell 'em cheap misadventures to parts of travel misery unknown. And, of course, they recently decided to go one step further by grounding one of their vessels on the Italian coast and sending paying customers to the Great Port of Call in the Sky. The Costa Concordia may have fooled some into thinking it was operated by a "safe" European line, and people literally paid with their lives for this error.

So it is with the Royal Caribbean Explorer of the Seas turning into the Vomiter of the Seas as it somehow managed to sicken 600 passengers. Again, the Royal Caribbean name may have fooled some into thinking they were journeying on a decent European liner. Actually, Royal Caribbean used to be a pretty respectable liner.  It was founded by Norwegians after all, but it was purchased by US-based Celebrity Cruise lines in 1997. Celebrity, of course, is also famous for sickening its passengers in that quintessentially American style. It thus comes as no surprise that Royal Caribbean would adopt the same sort of, er, "management techniques."

Bottom line: Stay away from all these race-to-the-bottom American cruise lines. The Carnival-Celebrity axis of sink 'n' spew is justly derided, but they also have subsidiaries that try to dissociate themselves from their horrid US owners. Nice try, but I think the global public is [pardon the expression] catching on.

UPDATE: Royal Caribbean is now lowballing its ghastly cruises to $32/night. Classy, huh?
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USAID Told to Get Lost Pt. 3 (Ecuador Edition)

♠ Posted by Emmanuel in , at 1/26/2014 05:59:00 PM
I almost forgot to post about this one (apologies). Mostly on the grounds of political interference, the United States Agency for International Development (USAID) has, in the past few years, been bounced from Russia and Bolivia. The proximate cause is when USAID provides funding to civil society organizations which may not be in the best standing with the leaders of these countries. And so the story repeats itself in Ecuador:
The United States has canceled aid to Ecuador worth $32 million over the coming years after long-running disputes with the government of socialist President Rafael Correa, according to U.S. officials. Correa, a U.S.-trained economist, has often been at odds with Washington since winning power in 2007. He accuses the U.S. government of trying to undermine him and this year Ecuador renounced U.S. trade benefits dating from the early 1990s [see here].

According to a U.S. State Department spokesperson, Ecuador recently informed the U.S. Agency for International Development (USAID) it could not undertake new activities or extend existing ones without an accord governing bilateral assistance. This led to the U.S. decision to cancel the aid. "Our planned $32 million in assistance programs for the coming years would have allowed us to partner with Ecuadoreans to achieve their own development goals in critical areas," said a letter dated December 12 from USAID to Ecuador seen by Reuters.
Ecuadorean grievances with American interference during the term of Correa are plentiful:
President Correa has made no secret of his disdain for US officials who he sees as overreaching their diplomatic duties and meddling in domestic affairs. In 2011, he kicked out the US ambassador for comments made in a diplomatic cable published by WikiLeaks that said Correa might have been aware of high-level police corruption. A year later, he granted asylum to the face of WikiLeaks, Julian Assange, who is still holed up in Ecuador’s London embassy.

“In some ways these actions, and the [USAID decision] can be put in there too, are intended to say that we are an independent sovereign nation,” [...] “In the perspective of many in Latin America, and with good reason, USAID is seen as an agent of US imperialism.”

Last year, Correa ordered his government to analyze the impact of a USAID exodus. Requests for comment to Ecuador’s Foreign Affairs Ministry were not returned Friday. Correa in June was granted wide-ranging powers to intervene in the operations of non-governmental organizations (NGOs), which often receive funding from USAID. The decree also created a screening process for international groups wanting to work in the country.
It is ironic, really. In the name of "development," the US funds politically-opposed NGOs that make no bones about their disdain for the host government and openly wish it replaced. Meanwhile, the supposedly "anti-imperialist" Ecuador is especially prone to muzzling dissenting voices. There are no real protagonists here. Still, the end result of this power play is (again) adios, USAID. 
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Can [Mexico, Turkey] Withstand EM Selloff?

♠ Posted by Emmanuel in , at 1/24/2014 07:26:00 PM
OK, here's the quick version of What's Going On in the World Economy. Despite the US jokeonomy failing to revive from comatose to, say, zombified as witnessed by the labor force participation rate falling with no end in sight, the rumor is that the Fed will further slow down its purchases of US Treasuries. In turn, expectations of higher interest rates Stateside is causing a selloff in emerging markets as investors repatriate their funds.

Who, then, is macho enough to weather this Made In America @&^*storm? Argentina is putting the pedal to the metal on the highway to hell, but it was headed in that general direction anyway. Hence the emerging markets' latest battle cry to all those who care to listen: Developing countries are not all alike! We're not Argentina! Or so they say from Davos, Switzerland.

Among those protesting most loudly there is Turkey, most likely because many commentators have lumped it with the "developing economies likely to falter" category. And so the lira goes...but not as far as the Argentinean peso, officials claim:
Turkey's Deputy Prime Minister Ali Babacan said the lira's tumble on Friday was a "re-pricing process" due to recent political turmoil as well as the U.S. Federal Reserve's plan to gradually withdraw stimulus.

"What's happening in Turkey mostly is a re-pricing process. Not only just because of the Fed's tapering but also the recent political events have triggered some market volatility," he told a panel at the World Economic Forum in Davos. Turkey's lira tumbled to new lows on Friday and investors doubted its central bank's ability to stem the rout as Prime Minister Tayyip Erdogan seeks to defuse a corruption scandal and stem a challenge to his power.
As an import-dependent economy with a quickly depreciating currency, I am unfortunately wary of Turkey's situation. OTOH, similar protestations about economic health are being made by Mexico:
The current volatility in currency markets will have some effect on Mexico, but without major disruption, Mexican Finance Minister Luis Videgaray said in an interview with Reuters Television. "Mexico is an emerging market, so all volatility is going to have some effect, but Mexico is well-positioned to weather the currency storm," Videgaray told Reuters TV on the sidelines of a gathering of business and political elites in this Swiss mountain resort...

Looking ahead, emerging markets are expected to face a volatile 2014 as the U.S. Federal Reserve scales back its stimulus programme. "We expected this year to be a volatile year for EM as the Fed tapers," he said, adding that volatility "will happen throughout the year as tapering goes on." The minister said Mexico's currency, the peso, was currently quite liquid. Should that change, Mexico would consider intervening, he said. "I don't see any problems of liquidity in the market for the Mexican peso," he said. "We would intervene to provide liquidity in the market, but this is not the case now; the peso is quite liquid now." 
Mexico has better macroeconomic fundamentals to withstand the EM selloff. Most importantly, it has a healthier balance of payments than Turkey, which has a gaping current account deficit it is (unsuccessfully) trying to belittle. Mexico will take its lumps, but I expect it to fare well among the EMs.
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Party Like 2001: Argentina Again Headed for Default

♠ Posted by Emmanuel in , at 1/23/2014 01:33:00 PM
There is no shortage of bad news these days...even The Captain and Tennille of "Muskrat Love" fame are calling it quits. In a sort-of related story, the Argentinian love affair with the retro-Peronist Fernandez-Kirchners appears to be coming to an end. Buoyed earlier by disavowing its foreign debt and engaging in a program of massive government spending powered by money printing, things were bound to come to an unfortunate end sooner or later. 2014 may be the year when the hurt that has been storing up since Argentina's 2001 default comes back in a big way:
Thirteen years after that collapse, President Cristina Fernandez de Kirchner is running out of time to avert another crisis. The policy mix that Fernandez and her late husband and predecessor, Nestor Kirchner, used to usher in 7 percent average annual growth over the past decade -- higher government spending financed by printing money -- is unraveling. 
Populism plus mismanagement equals a fine mess as the government has issued economic statistics from fantasyland to hide the extent of its woes. The government claims inflation "only" in the low double digits, but more reality-based calculations suggest more than that--even double:
Inflation soared to 28 percent last year, according to opposition lawmaker Patricia Bullrich, who divulges monthly estimates for economists cowed into silence by Fernandez’s crackdown on price reports that clash with official figures. By the government’s count, inflation was less than 11 percent.  
And we get to the most dispiriting thing: the 2001 crisis was accompanied by the Argentine currency board being shattered to smithereens as its pegged rate could not be maintained. Well, guess what? In 2014, the Argentine peso is worth even less than way back when. Some progress, huh?
The peso sank 3.5 percent to a record low of 7.14 per dollar yesterday, according to Banco de la Nacion Argentina, and has plunged more than 25 percent in the past 12 months. That’s its worst selloff since the devaluation that followed the default. Currencies from only three countries in the world have fallen more: war-torn Syria, Iran and Venezuela.

Power outages like the one that sunk Kanaza’s shop into darkness are becoming more frequent, deepening the economic slump, after the nation’s grid atrophied under a decade of government-set electricity price controls. The International Monetary Fund, which censured Argentina last year for misreporting inflation, predicts economic growth will slow to 2.8 percent this year, about half the 5.1 percent average across developing nations. 
No electricity, soaring inflation, violent protests, worthless currency...some successful anti-neoliberal project this is. The general pattern of what's happened in Venezuela and Argentina are similar. The populists Hugo Chavez and Nestor Kirchner were able to buy off public support in the face of rising global commodity prices. However, their successors Nicolas Maduro and Cristina Fernandez have been unfortunate enough to be in office at a time when commodity prices have slumped and these countries' economic fortunes have become pear-shaped. Against such an unfavorable backdrop, they have no money to go where their mouths are at.

Argentina is also beginning to play nice with the international community after years of playing the "screw the foreigners"  cards to win domestic approval. It's probably too little, too late:
As dollars vanish from the central bank, the government has begun to seek to normalize relations with foreign creditors. On Jan. 20, Argentina presented a proposal to the Paris Club of creditors to seek a negotiated resolution to outstanding debt of about $10 billion. The government also has begun talks to compensate Repsol SA for the stake in oil company YPF SA it nationalized in 2012, and is preparing to unveil new inflation and growth data to address International Monetary Fund concerns over the accuracy of official statistics. 
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Lampooning PRC 'Non-Interference' in South Sudan

♠ Posted by Emmanuel in ,, at 1/21/2014 08:54:00 AM
Does China side with President Salva Kiir or Rick Machar? Both? Neither?
 Us folks working in development studies are simply fascinated by the mysterious foreign aid activities of China. Unlike rich countries which are members of the OECD Development Assistance Committee (DAC) and disclose who receives their aid, for which projects and in what amount, China does not feel an obligation to do so. A few years ago now, China released a white paper on foreign aid that gave a fleeting glimpse of its aid practices, albeit without disclosing how much it has actually provided over the years and much more.

China's practices do not really qualify as "official development aid" in the Western OECD sense. As AidData noted:
Chinese foreign aid has long been a subject of scrutiny and controversy. It doesn’t easily fit into the OECD’s definition of Official Development Assistance (ODA). Much is financed through the China Eximbank in the form of concessional loans that directly support Chinese economic interests, and carried out by embassies and consulates rather than development agencies. Most importantly, project-level data on Chinese aid is essentially non-existent
Such lack of transparency and emphasis on extractive industries in places alike the African continent occasions much hand-wringing. The cartoon above lampoons China on two of its main selling points to the rest of the world: (1) its non-interference in the internal affairs of other countries and (2) its status as a developing country alike them. South Sudan's early post-independence years are turning out to be tumultuous indeed, with political factions fighting in what remains an exceedingly poor country despite its vast energy reserves.

As is often the case, the countries that can least afford such unproductive conflicts often engage in them. The cartoon asks us, is China making the situation in South Sudan worse because of its indifference to politics for as long as it gets its cut of energy supplies? You can argue that China is caught in the midst of someone else's conflict it has played little part in fostering. OTOH, its indifference combined with a generous dole out to those willing to support its energy extraction needs may literally be fueling the conflict. At any rate, the current conflict crimping its supply is urging it to mediate to some extent between the two sides--both of which whose favor it has courted before.

There are no easy answers. All the same, China should be increasingly mindful about how Africans are portraying its activities as in the cartoon above.
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Secrets of Orlando's 'Harry Potter' Theme Park Success

♠ Posted by Emmanuel in , at 1/21/2014 08:51:00 AM
You needn't be a movie star to enjoy Butterbeer,; just head to Orlando FL
Here's another example of the fallibility of what you read on the Internet--this time from, er, me. Three years ago, I thought that the development of a Harry Potter theme park in Orlando, Florida based on the world-conquering series of books and cinematographic adaptations was a bad idea. Why? Simply put, it deals with location, location, location. If the series were set in a sunny and humid climate where the protagonists wore beach shorts and flip-flops all the time, then there would be no problem. As it is, however, the series is set in a dark, dank, and damp England.

So, kudos are due to Universal Studios since things have turned out very well. They took risks and have been handsomely rewarded. All the same, the secret weapon behind its success is an unlikely one: Harry Potter happens in a virtual (non-existent) space you must reach by boarding a fictional train. However, the evocative appeal of hypothetical foodstuffs being served in this realm have long attracted attention from fans and foodies alike. Use "Harry Potter cookbook" for your search terms on Amazon and knock yourselves out. As it so happens, much of Universal's financial success has to do with being authentic--in spirit at least--to foodstuffs from the movie.

For the first time ever, we have an excerpt from Tourist Attractions & Parks magazine on food theming:
Yet, despite these three different [ride] thrills, the real story behind the success of Universal’s Harry Potter world centers around the less publicized but higher profit food, beverage, and merchandise operations that seem to have cast an irresistible spell on guests and their pocket books...

According to Brent Young, the president of Super 78, a visual solutions company with deep roots in the theme park industry, “it is well known in the creative community that theming food and beverage creates a consistent guest experience and park attendees are much more likely to want to interact with the themed environment in a real way.” This is what makes the food and beverage operations at the Wizarding World even more impressive:  Universal was able to take an existing concept, themed dining, and transform it into part of the overall “storyline” while still making mounds of money in the process.
Take, for instance, "butterbeer":
Up until the Wizarding World debuted, the fascinating drinks and meals that Rowling created in Harry’s World had been intricately described by the author but never really tasted.  After all, these dishes and beverages never actually exist beyond the pages of the novels [but see my rejoinder above on unofficial themed cookbooks].  This meant that, in developing the culinary side of Harry Potter’s world, Universal had to transform fictional items to real-world tastes.

An easy and less expensive route could have been to de-emphasize the culinary authenticity of that part of the Wizarding World.  Sources close to the project, though, explain that [series author J.K.] Rowling would have none of this.  Her dictate was that all aspects, not just the attractions and physical buildings, must transport the guest into Harry’s world.

As a result, Universal spent large amounts of time and money to refine the recipe for the iconic Butterbeer beverage from the Potter novels.  Numerous recipes and taste tests were held to refine every aspect from the first sip to the final aftertaste.  This was all done to insure that Butterbeer was not too sweet nor too bitter, not too syrupy nor too watery.  Not too everything nor too everything else but instead the perfect replication of a heretofore fictional drink.

The end product was one of the amusement industry’s most expensively designed beverages ever, and, according to these same sources, one of the most financially successful ones ever.  Indeed, this investment has yielded amazing revenue for Universal, more so than even their most optimistic expectations.
As far as I can tell, the shortcomings of the Orlando climate in mimicking that of England are more than made up for in the minds of punters (Brit-speak for paying customers) by authenticity to fictional foodstuffs. They stand in line for minutes and are more than happy to do so. Go figure; I guess there are good reasons why I'm not in the theme park business.
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So Long, Asia: Africa is Now Fastest-Growing Continent

♠ Posted by Emmanuel in , at 1/19/2014 10:13:00 AM
At  midyear 2013, IMF bloggers declared Africa to be the second-fastest growing region in the world after (developing) Asia. Fast-forward a couple of months and it now has the distinction of being the world's fastest-growing region outright. Given that Africa has unfortunately lagged behind other regions in terms of growth during the past few decades, this occurrence is a welcome one, and this Asian certainly bears no grudges in seeing our African peers outperforming. Well done!

However, this distinction being bestowed by the African Development Bank, the AfDB unsurprisingly asks for more of the "good governance" agenda it has championed for quite some time alike its other regional development bank counterparts as well as the World Bank. It is still very much in vogue in development circles:
Africa is now the fastest growing continent in the world, the African Development Bank’s Annual Development Effectiveness Review 2013 [ADER] states. The report, just published, says this growth has been driven mainly by improved economic governance on the continent and the private sector. “Africa’s economic growth could not have happened without major improvement in economic governance.

More than two-thirds of the continent has registered overall improvement in the quality of economic governance in recent years, with increased capacity to deliver economic opportunity and basic services,” it says. 
What kinds of improvements in governance are we talking about here? The AfDB centers on another chestnut of these institutions, the ease of doing business. Instead of having to pay bribes to various officials working in different government agencies to start up a (formal) business, African nations are supposedly reducing such opportunities for petty corruption and making it easier for entrepreneurs to get started:
The report says the costs of starting a business, for instance, have fallen by more than two-thirds over the past seven years, while delays for starting a business have been halved. It says the private sector has become the main engine of growth as the continent continues to improve its business climate. This growth is increasingly driven by internal demand.

“This progress has brought increased levels of trade and investment, with the annual rate of foreign investment increasing fivefold since 2000. For the future, improvements in such areas as access to finance and quality of infrastructure should help improve Africa’s global competitiveness,” the report states.
Better yet, the growth seen in recent times should continue into the medium term:
According to the ADER, growth in the continent’s low-income countries exceeded 4.5 per cent in 2012 and is forecast to remain at above 5.5 in the next few years. Africa’s collective gross domestic product (GDP) reached US $953 while the number of middle income countries on the continent rose to 26, out of a total of 54.

“Strong economic growth has made major inroads into income poverty. The share of the population living below the poverty line has fallen from 51 per cent to 39 per cent. Some 350 million Africans now earn between US $2 and US $20 a day, and the middle class is increasingly becoming an active consumer market,” the report says.
Some good news amidst doom and gloom in the developed world. 
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Why China Holds Upper Hand Over US in Asia for 2014

♠ Posted by Emmanuel in , at 1/18/2014 03:13:00 PM
Or so the Nikkei Asian Review believes. And the reasons for China reasserting its sphere of influence in the region are straightforward. On China's part, it has the bully pulpit in 2014 as the host of the Asia-Pacific Economic Cooperation (APEC). So, member economies' ministers--maybe even the Philippine president the PRC has put in its doghouse--will be trooping to the Middle Kingdom over the course of the year:
Holding the rotating chair of the APEC forum this year, China will host a series of APEC meetings, including those of ministers in charge of trade, energy and finance, in various parts of the country starting in May. The series of APEC events will culminate in a summit of leaders in a Beijing suburb in early autumn, which will be chaired by Chinese President Xi Jinping.

The APEC meetings will cover issues in a wide range of areas, including trade and investment rules and environmental and energy cooperation. By presiding over them, China will try to demonstrate its growing presence in the Asia-Pacific region. "The Xi administration sees the proposed Trans-Pacific Partnership pact, which the Obama administration is actively promoting, as part of Washington's efforts to leave China out and cement the U.S-led international order in Asia," said one source close to U.S.-China relations.

This fear will probably prompt China to try to take advantage of its role as APEC chair this year to regain some of the lost ground in the competition with the U.S. for influence in the region.
OTOH, the United States foreign diplomatic machinery will be stuck in its usual holding pattern due to the midterm elections, set to be held just as APEC gatherings reach their summit:
The odds seem to be against the Obama administration, at least this year. The energy the Obama administration can devote to promoting its Asia policy will be fairly limited as it will have to concentrate on campaigning for the Nov. 4 midterm Congressional elections in early autumn, when the APEC summit will be held.

The quadrennial Congressional elections will be very important for Obama's Democratic Party, which has a majority of seats in the Senate, but not in the House of Representatives. If the Democrats fail to end the divided Congress by wresting control of the House from the Republican Party in November, the Obama administration could lose some steam, with two years left before his term expires.
If Obama becomes an even lamer duck due to electoral setbacks for his party, then he will have even less leeway on the foreign policy front to make a major push towards Asia. 
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The Rise and Rise of FDI From the Global South

♠ Posted by Emmanuel in , at 1/17/2014 05:20:00 AM
Much has been made of the protectionism which firms such as those from China have encountered investing in the West. I have called specious arguments on "national security" grounds unvarnished racism, and such discrimination certainly plays a part. Moreover, I have been further vindicated by leaks that reveal massive American spying on its own citizens and those of the rest of world. Who's the real "national security" threat here when one of the largest US tech firms labels its government as an "advanced persistent threat"? You are, quite frankly, a bleeping moron to believe in US security guarantees, especially when it comes to online activity. Internet freedom is effectively unlimited America freedom to spy on you.

However, developing countries' efforts to invest elsewhere is largely driving the ongoing controversy. That is, there would be nobody to discriminate against if their firms stayed home. Accordingly, there's interesting stuff in the current issue of Global Finance about the ever-rising amount of FDI originating from poor countries. Otherwise put, these are countries that in the not-so-distant past would have been mere recipients of FDI:
By far the biggest FDI story of the past few years is the rise of developing and transitioning countries as a source of outward FDI, which jumped from $65 billion in 2003 to $481 billion in 2012. Naturally, China is in a league of its own. In 2012 it came in third among the world’s top 20 investor-economies, behind only the US and Japan. Beyond the acquisitions it has been making across OECD countries, China is aggressively developing natural resources and infrastructure from Africa to the Middle East.

For example, in 2013, PetroChina bought a 25% stake in the Iraqi oilfield of West Qurna 1, right around the time construction of the new Mombasa-Nairobi railway line began in Kenya, financed by the Export-Import Bank of China to the tune of $4 billion. But the new FDI landscape does not include just China. FDI originating from emerging markets is multiplying around the world. In 2013 a Chilean bank took over an American one, a Thai energy company made its first investment in Australia, and the largest Coca Cola bottling company in Mexico acquired a competitor in Brazil.
Notably, however, Global South investors do not invest in the same way their Global North counterparts--traditional TNCs--do:
Importantly, developing and transitioning country investors display characteristics that set them apart from traditional developed-world multinationals.

For one, state-owned enterprises and sovereign wealth funds generate the lion’s share of outward investment. This raises concerns about fair competition. “SOEs may have access to lower-interest loans and better financing conditions [than non-SOE competitors],” says Masataka Fujita, who heads the investment trends section in the division of investment and enterprise at Unctad. “SWFs even have a large amount of assets under management, and, like in the case of SOEs, their governance structure is not always transparent.” Their operations are also viewed with suspicion by host economies because a foreign government is behind them.

In addition, emerging markets companies seem to prefer mergers & acquisitions over greenfield investment as a mode of entry, especially when it comes to FDI into developed countries. “They look to OECD countries because these remain the world’s largest markets and because they are interested in the technology found here,” says José Guimón de Ros, associate professor of economics at the Universidad Autonóma de Madrid in Spain. “Since the crisis, many developed-country companies are under stress and therefore cheaper, so now is a good time to buy them.” Partially as a result of this phenomenon, cross-border M&A has held steady in 2013, stabilizing global FDI flows even as investment in new productive assets has declined.

Finally, emerging markets companies are inherently more familiar than their OECD counterparts with how to do business in a developing-country setting. In part as a result, the majority of investment from emerging markets is going to other emerging markets. According to Unctad, in 2011, China exported 70%, and Brazil 40%, of its outward FDI stock to neighboring emerging economies. “Regulations in developing countries are less complicated,” says Du The Huynh, senior lecturer at the Fulbright Economics Teaching Program in Ho Chi Minh City, Vietnam. “The competition is also less fierce.”

The telecom sector illustrates this well. Vietnam’s largest mobile-network operator, Viettel, has successfully established itself in Mozambique, Haiti, Laos and Cambodia, countries that by most OECD investors’ standards are difficult places to do business.
True, the Western media headlines are dominated by South-North FDI. real Yet it's not mostly the formerly colonized investing in the heartlands of the erstwhile colonizers, but poor countries venturing where rich countries dare not--scared off by corruption and other bogeymen for white people. Yes, South-South investment is happening:

to paraphrase Aretha Franklin, Queen of Soul, poor countries are doin' it for themselves.
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PRC Industrial Policy: Killing Off 75% of Solar Makers

♠ Posted by Emmanuel in , at 1/15/2014 10:52:00 AM
Well surprise, surprise: Having reached a settlement last August with the European Union which was previously set to slap anti-dumping tariffs on its solar panels, we now get word on the extent of China's subsidies for the industry. At year-end 2013, the PRC's government rolled back the industrial benefits allotted to this industry, and there is now expected to be a bloodbath on the production floor of China's manufacturers. How bad will things get? Try a 75% "death sentence" rate as only a quarter or so of firms will remain eligible for government support. From the Nikkei Asian Review:
The Chinese government is pushing for a drastic shakeout of the country's overcrowded solar cell industry, supporting only a quarter of players and practically telling the rest to get out of the business. The Ministry of Industry and Information Technology has announced a list of 134 producers of silicon materials, solar panels and other components of photovoltaic systems as meeting certain conditions, as measured by 2012 production, capacity utilization and technical standards.

In a sector said to have more than 500 companies, the ministry's move means that three-quarters didn't make the cut -- including the core subsidiary of Suntech Power, which went bankrupt in March, and Jiangsu Shungfeng Photovoltaic Technology, Suntech's startup rescuer.

These firms will not be able to get credit lines from financial institutions and thus will have a tough time borrowing, according to industry insiders. They will also no longer be eligible for refunds of export tariffs, a huge blow to companies that depend on overseas business. On the home front, it will be difficult for them to participate in state-run utilities' auctions, sharply curtailing their opportunities to win orders.
Bye bye subsidized loans, export tariff refunds, and ultimately financial viability. Even in this part of the world, the alternative energy revolution seems to have bitten the dust before it got started as matginal Chinese manufacturers are being fed to the 120 hungry dogs of cold, hard market reality. 
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