Word: sectoral
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Government intervention! Private-sector-bashing! Americans trying to impress Europeans! These and other pinko motivations would secure a permanent federal handout for Yogi Bear and his picnic-basket-redistributing comrades. You can imagine how the proposal might go down were the parks starting from scratch today. Socialized nature, controlled by tree czars...
...months after Franklin D. Roosevelt took office in 1933, Congress legislated a transformation of the financial sector, establishing a new regime of securities regulation, creating the Federal Deposit Insurance Corporation and segregating commercial banks from Wall Street. It's not obvious that we need such a drastic overhaul now, but the contrast with the 1930s is stark. Ironic, too. By leaving financial markets alone, Mellon and his kindred spirits at the Fed ushered in an economic collapse that led to permanent government intervention in the financial sector. By intervening, Paulson and his kindred spirits at the Fed seem to have...
...Instead, government planners are banking on GEM to help SMEs get access to capital, augmenting previous initiatives such as the Small and Medium Enterprises Board that the Shenzhen bourse set up in 2004 and state funding for the domestic private equity sector to supply SMEs with venture capital and other funding. GEM, in particular, is regarded as a platform to jumpstart ventures that could dominate China's post-crisis economic environment, in which heavy industry and manufacturing is supposed to take a back seat to higher "value-added" and consumer-focused businesses. It is no coincidence that some in local...
...China's problem is that the recent state-directed deluge of bank lending has resulted in a recovery in GDP growth but the money is not filtering down to the SME sector. Loans are going mainly to politically connected state-owned enterprises, which now comprise just 40% of the economy and create only a quarter of jobs. It's an entrenched situation that dates back to the days of economic central planning, and something that China's communist rulers do not seem to have the political gumption - or indeed the desire - to change. (Watch a video about China?s knockoff...
...question is whether GEM will be more effective than the banking sector in meeting the funding needs of SMEs. Prospective GEM companies certainly hope so. The 10 enterprises initially aimed to raise around $490 million, but doubled the target after IPOs like Bawang were accorded high valuations. Based on their aggressive IPO pricing, the average price-earnings ratio of the 10 stocks is estimated at 55 times 2008 profits, higher than the average p/e ratio of 40 times asked by the 10 companies that most recently listed on the SME Board. (See pictures of Shanghai today...