Genting Malaysia Buys Properties From Genting Bhd

Yeah, it's a known fact that Genting Malaysia (Resorts World) is a cash rich company.

It's a known fact that most suggest buying Genting Malaysia for it's so-called cash-per-share yardstick.

Some don't like this yardstick.

I don't also.

Because this yardstick is not a fool proof investing strategy.

Why?

Because, ultimately the decision on how the company uses the cash in the company is beyond the say of the minority shareholders. For example, if the company decides to splash the cash at some questionable investments, we, the minority shareholders, can only make some noise over. And more often than not, it's just some empty tin cans making lots of noises.

Anyway, on the Edge Financial Daily Genting M'sia buying PROPERTIES from parent for RM228.64m!

• Genting M'sia buying properties from parent for RM228.64m
  Written by Joseph Chin
  Tuesday, 08 December 2009 19:30
  
  KUALA LUMPUR: Genting Malaysia Bhd (formerly RESORTS WORLD BHD []) has entered into two related party transactions with its parent GENTING BHD [] by proposing to buy two companies and their PROPERTIES [], for a total of RM228.64 million.
  
  Oakwood owns the 25-storey Wisma Genting in Kuala Lumpur while GHTP owns two parcels of land in Segambut, Kuala Lumpur.
  
  Genting Malaysia, as the largest single tenant, occupies eight floors and two basement levels in Wisma Genting for a total annual rental of RM3 million. The first acquisition will thus enable Genting Malaysia to reduce its annual rental expenses at the consolidated level.
  
  "In addition, Genting Malaysia will earn an annual rental income of approximately RM17.3 million from the other tenants of Wisma Genting, who will provide a source of sustained recurring income and long term value for the property," it said.
  
  As for the acquisition of the Segambut land, which Genting Malaysia is using as a storage area and depot for its buses and limousines, it will reduce its rental expenses at the consolidated level by about RM300,000 annually.
  
  "In addition, there is potential for the Segambut land to be developed and improved upon, either for Genting Malaysia’s use or for other future purposes," it said.

A related party transaction!!!

Don't you hate such transactions??!!

Buying property from its parent, which ultimately means, money going from left hand to right hand!

Does Genting Malayisa really needs to buy these properties at all???

And is Genting Bhd in dire need of funding that it needs to use such low inter-company sales agreement to raise funds???

More Disposal Of Assets Seen In LCL

In my last posting on LCL, More Comments On LCL, I mentioned the following..

• One has to consider how healthy LCL is with a cash balance of a mere 12.59 when LCL paid out some 18.748 million per quarter for its Financial Cost.
  
  And more of a concern too there were several disposal of properties mentioned.
  
  Given LCL's current financial position, some would be curious. Why the disposal?

On the Edge Financial Daily last night, LCL to sell sofa maker for RM1.14m

• LCL to sell sofa maker for RM1.14m
  Written by Yong Yen Nie
  Tuesday, 08 December 2009 23:00
  
  KUALA LUMPUR: LCL CORPORATION BHD [] has entered into a management buy-out agreement (MBO) with sofa maker Secret Sofa Sdn Bhd to dispose of the entire businesses and management of its unit LCL Cushion Sdn Bhd (LCLC) to the latter for RM1.14 million.
  
  LCL said its board had today entered into the MBO which would see the disposal of LCL's 80% stake in LCLC to Secret Sofa. Subsequently, Secret Sofa will take over the operations and management of LCLC and its unit LCL Sofa Creations Sdn Bhd (LCLS).
  
  LCL said the disposal was part of its strategies to streamlines the group's operations and business activities.
  
  "Secret (Sofa) shall take all profits and existing movable and immovable assets including but not limited to all stocks, materials, foam, machinery, tools, vehicles, and works under all projects of the company as at Aug 31, 2009 and shall assume all debts and liabilities incurred from Sept 1, 2009," LCL said.
  
  It added that the purchase price would be used to offset against the net amount owed to LCLC or LCLS by LCL's subsidiaries or associate companies as at Aug 31, 2009.
  
  "Any net amount owed to LCLC shall be considered as goodwill and result in an upward adjustment of consideration," LCL said.
  
  LCL said given that the original cost of investment in LCLC was RM438,000, the disposal in LCLC would result in a gain of RM698,404, based on the latest audited accounts of the group as at Dec 31, 2008. LCL said the disposal would be completed within four months.

Makes you really wonder, no?

Is this yet another indicator that not is well for LCL?

Vastalux Vice Chairman Keeps Dumping His Shares!!

Posted this the other day: A Look At Vastalux Energy

On the Edge Financial Daily Vastalux vice chairman sells another 13m shares

• KUALA LUMPUR: VASTALUX ENERGY BHD's vice chairman and executive director Mohamad Nor Abdul Rashid has continued to reduce his shareholding in the company.
  
  In the latest announcement on Dec 8, he sold another 13 million shares for 16.5 sen each in the open market on Dec 3.
  
  The previous day on Dec 2, he had also disposed of 13 million shares in the open market.
  
  The latest disposal reduced his total shareholding to 14% or 28.94 million shares.
  
  Vastalux has been under the spotlight after it resubmitted its results. It reported net losses of RM17.72 million in 3Q ended Sept 30, compared with net profit of RM7.25 million a year ago.
  
  Of concern to investors are the amounts RM163 million owed by customers and trade receivables of RM69.7 million.
  
  Revenue was RM32.13 million which was sharply below its cost of sales of RM51.42 million.

This certainly is not sounding good. Not when the company has balance sheet issue and not when the earnings performance from the company has been extremely dismal!

Vastalux closed yesterday at 0.185!

More On That SIlver Birdie

How should one value a company which has no profitability?

Got the following comments on the posting That Silver Birdie Once More!

• solomon said...
  If the valuation is based on profitability, I think it is not worth that much at all.
  
  I think the current share price is attributed to tight control of shares (60-65% shares controlled by 2 major shareholders via various firms). Possible of MGO in near term??

Yes, if based on profitability, this company certainly isn't much at all. The earnings performance for this company over the past few years certainly has been rather dismal and it clearly shows that the management clearly isn't able to perform. (Some would be quick to point out the issue against the quality of Silver Bird's bread and would also point out the health issue against its factory in Nilai back in 2006 (Ah.. some links can still be found on the net. Here's one roti terkenal diarah tutup - High5 tak boleh makan )

And would I value it against its book value?

At 1.2x as suggested by OSK?

Well there's one reason why I would be sceptical. Now if not mistaken Silver Bird so called state-of-the-art factory in Shah Alam cost the company a staggering 100 million.

Yes, a 100 million factory plant just to make bread!!!

And just when can one see the return of investment? And judging from recent years performance from Silver Bird, there's no indication that the return of investment has so far been so rather poor.

Now if Silver Bird spend so much for a plant that has so far shown no return of investment that justified the investment, how would one want to value this plant? Say for example, if Silver Bird does decide to dispose the plant, how much money could it even possibly fetch for the plant? If Silver Bird is lucky enough to find a buyer (not too many bread makers in the country would contemplate spending even 20 million on a new factory plant, let alone an 'old' one!), surely it would have to sell at a much bigger discount.

Oh, perhaps the factory land is worth money. No doubt. But surely not for 100 million.

And to even complicate things further, if I am not mistaken, I do believe that there was a sale and leaseback of the plant! (LOL! That's how financially weak this company was!)

Ah, the two big shareholders.

But some would point out that this is rather old news. Back in 2007, BizWeek - Tussle for control of Silver Bird stirs interest

Some comments of note in that article.

• Says a senior dealer with a stockbroking firm: “Silver Bird's share price has been depressed for a long time because of its poor financial performance in the past. Some people may view the third-quarter results as an indication that the company may finally turn around soon.”
  However, under scrutiny, the latest figures are not exactly a solid source of optimism. As the company acknowledged in the notes to the results, the improvement in profit was partly due to a RM12.2mil writeback of asset impairment taken up in last year's accounts.

Yes, it's financial performance is still poor today!

• An analyst points out: “Operationally, the company is not out of the woods yet. Its margins continue to be under pressure and there's much to be done to increase sales and profitability.”

It's now fy 2009 for Silver Bird. It lost money for fy 2007 and fy 2008. Doesn't it appear that the company has NOT done much at all to increase sales and profitability?

So we have two big shareholders.

How would we judge their investment in Silver Bird?

A good investment? Or a rather poor one?

Or should be judge the investment by REPUTATION of these two shareholders?

Of course major shareholders in a tightly control shares situation could do 'miracles' in the stock market (this not a shocker, yes? not in stock markets, yes?)(oh, I am merely acknowledging that this is a possibility. Not saying it will happen for sure. So do not assume too. :P)

How?

Have a look at this chart and see how Silver Bird had performed since.

That Star article was published on Saturday September 29, 2007. Silver Bird closed the previous day at 0.645. And thanks to the marvel of our financial press and also our market movers, Silver Bird the stock, soared. :P

AmResearch See Lots And Lots And Lots And Lots Of Projects To Be Rolled Out

Yes, there are some folks (LOL! These buggers perhaps have 'eaten full and nothing else better to do!' :P2 ) who do keep track of what's said and mentioned.

On 16th November 2009, on the Edge Financial Daily, AmResearch sees RM62b projects to be rolled out

• AmResearch sees RM62b projects to be rolled out
  Written by Joseph Chin
  Monday, 16 November 2009 13:34
  
  KUALA LUMPUR: AmResearch is maintaining its Overweight call on the CONSTRUCTION [] sector, where order book visibility should improve in the coming months as it expects up to RM62 billion worth of select cornerstone projects to be rolled-out over the next six to 12 months.
  
  It said on Monday, Nov 16 its top picks for the construction sector are WCT, IJM and Gamuda. It also prefered steel to cement stocks for exposure to the building materials theme - another key beneficiary of a re-acceleration of infrastructure spending. It continued to like steel maker ANN JOO RESOURCES BHD [].
  
  The pre-qualification tenders for the proposed Klang Valley Light Rail Transit (LRT) extension works were unveiled on Nov 3. Tenders are for facilities packages, which are is the main civil and infrastructure works, and other sub-packages.
  
  Submission for prequalification bids will be opened until Dec 16 although tenders for the systems and rolling stock portion - which includes mechanical & electrical (M&E) - have yet to be called for.
  
  The Edge Weekly reported the scope of works for the facilities package include guideway structures, actual stations and the park & ride buildings. Tt added that the main civil works programme could be broken down into six main packages. This includes the actual bricks-and-mortar structure for the tracks as well as LRT stations.
  
  AmResearch said earlier reports stated the Klang Valley LRT extension works were expected to cost an initial RM7 billion. The project entailled construction of additional tracks linking both the Kelana Jaya (17km) as well as Ampang (17.7km)lines to Putra Heights along the southern tip of Klang Valley.
  
  "Based on our channel checks, most big construction outfits in Malaysia have submitted bids for the civil works part of this massive project. But we our unclear as to how the work packages would be carved out - e.g. vertically or geographically spread," it said.
  
  AmResearch said going by operating track record, it believed both IJM Corp Bhd (IJM) and GAMUDA BHD [] (Gamuda) are frontrunners for the LRT jobs. However, it did not discount possibility of a consortium being formed to facilitate entry of other local players at subcontractor level, which may include WCT BHD [] (WCT) and Loh & Loh Bhd.
  
  As for the M&E portion, it said that the scope for local participation appears limited due to the high-level of technical expertise required to build and commission LRT systems.

62 Billion worth of projects.

Today, 8th December 2009, on the same business editorial, AmResearch sees RM67.1b worth of job awards.

• AmResearch sees RM67.1b worth of job awards
  Written by Financial Daily
  Tuesday, 08 December 2009 11:15
  
  KUALA LUMPUR: About RM61.7 billion worth of infrastructure projects could be awarded over the next six to 12 months, AmResearch Sdn Bhd said.
  
  The research house said yesterday that the largest chunk of the projects would be the RM30 billion light rail transit (LRT) extension in the Klang Valley.
  
  They are for the extension of the Ampang/Kelana Jaya line and new Cheras-Kota Damansara line. The companies expected to be in the running for the civil works are the UEM Group, MMC CORPORATION BHD [], GAMUDA BHD [], IJM Corp Bhd, WCT BHD [] and MALAYSIAN RESOURCES CORP []oration Bhd.
  
  The second largest project will be the RM14 billion undersea transmission cable from Bakun dam in Sarawak to the peninsula. The project will be awarded by the federal government and the potential contractors are MRCB and foreign entities.
  
  AmResearch said another project expected to be awarded in the period is the RM5 billion Gemas-Johor Bahru double-tracking project initiated by the federal government. The potential contractor would be Global Rail Sdn Bhd and China Infraglobe Consortium.
  
  The other projects are the tunnelling works for the RM1.3 billion Pahang-Selangor raw water transfer, which are likely to be undertaken by members of the Shimizu-Nishimatsu-UEM-IJM consortium.
  
  Also in the pipeline is the RM4.5 billion Langat 2 Water Supply Scheme, where the water transfer project is expected to be undertaken by Gamuda Bhd and Loh & Loh Bhd. The piping is likely to be undertaken by JAKS Resources Bhd.
  
  “We continue to remain overweight on the steel sector as an anchor reflationary theme. Unlike cement, prices of steel are at the early stages of a cyclical upswing.
  
  “Furthermore, earnings of local steel companies should gain traction as domestic steel demand supplants exports moving into 2010. Within the sector, we continue to like ANN JOO RESOURCES BHD [] for leverage to rising steel prices,” it said.
  
  AmResearch cited a news report that BHP Billiton had inked an agreement with Rio Tinto to set up a US$116 billion (RM394.4 billion) joint venture that will combine their Western Australian iron ore operations.
  
  “We understand that a BHP-Rio Tinto marriage in Australia will result in savings on capital and operational costs worth at least US$10 billion a year,” said the research house.
  
  The mining giants each operate extensive rail and port facilities in Western Australia, particularly in the resource-rich Pilbara region.
  
  Both parties expect the deal to be consummated within the second half of next year. Such a move will likely solidify the bargaining leverage of two of the world’s top three global iron ore producers.
  
  By merging their resources in Australia, both BHP and Rio Tinto would have a combined iron ore production of 350 million tonnes. If BHP’s expansion plans remain on track, this would rise to 375 million tonnes next year.
  
  AmResearch said this could have a significant impact on the bargaining leverage of steel millers all around the world, including Malaysia.
  
  Select local players that purchase iron ore as part of their feedstock include Perwaja Holdings — the steel-making arm of the Kinsteel Group — and the Lion Group.
  
  Meanwhile, the research house gathered that Ann Joo Resources Bhd was looking to secure future supply of iron ore ahead of the rollout of its new blast furnace by July 2010.
  
  
  This article appeared in The Edge Financial Daily, December 8, 2009.

How now my dearest moo moo cow?

I do wonder how many days there are between 16th November 2009 and 8th December 2009 (LOL! It's no trick question and this ain't no contest either. And just in case, you need to count with the fingers, that's 21 days. :P)???

The number of jobs expected have jumped from 62 Billion to 67.1 Billion.

That's an increase of 5.1 billion in 21 days.

LOL!

I wonder if the next 21 days, will we see more jobs expectations from AmResearch?

ps: since they so bull, you think I should buy all them stocks mentioned? :p2

That Silver Birdie Once More!

Silver Bird was one stock that I wrote a lot on before. If you follow my postings on Silver Bird, you can clearly see that I am not a fan.

Today, I noticed that OSK had a report on Silver Bird (naturally I was interested to read what it wrote since it's a really slow day! :p )

Back in 2006, I did mumbled on OSK earnings estimates for Silver Bird in the posting That Silver Birdie... Back then OSK earnings estimates were an incredible 32 million (despite the current earnings back then, suggested it was near impossible to reach those numbers).

Now what's incredible is that since Silver Bird was losing money the past couple of years, OSK earnings estimates for Silver Bird is rather low. (Speak volume on the quality of this company!)

Only 1.6 million for fy 2009 and 5.6 million for fy 2010.

Now get this, back in March 2006, Silver Bird was trading around 65 sen. Today it's trading around 76 sen. (As mentioned in that posting, "And in Dec 2005, Silver Bird announced its 2005 Q4 quarterly earnings. Silver Bird made only a net earnings of 19.4 million for its fy 2005! And its Q1 earnings was some 1.1 million.

Silver Birdie of today? Let's look at recent news.

30th April 2009, on Business Times.

• Silver Bird confident of profit turnaround
  
  By Sharen Kaur Published: 2009/04/30
  
  BREAD maker Silver Bird Group Bhd (7136) said it is optimistic of returning to the black this year, driven by government subsidy for white bread, lower operating cost and wider distribution channels.
  
  The main board company, famed for its High5 high-fibre bread, reported losses in the last three consecutive years.
  
  For fiscal year ended October 31 2008, it posted a net loss of RM21.2 million on revenue of RM638.6 million, mainly due to the writeback of impairment loss in 2007.
  
  Group managing director Datuk Jackson Tan said 2009 will be a much better year for Silver Bird, thanks to the government subsiding 7.9 sen for every 100 grammes of white sandwich bread, lower wheat price, and new products it has in the market.
  
  The company expects business to grow by more than 20 per cent this year, outperforming the fresh bakery industry growth of 10 per cent annually, he said after a shareholders meeting in Shah Alam yesterday.
  
  "The industry is resilient. In this doom and gloom, we have an operating environment which favours us. Wheat prices have stabled while other food commodities such as rice have gone up by almost 30 per cent, making bread an alternative source. So the group is flying high in this turmoil," he said.
  
  Tan said a further downtrend in wheat prices may happen this year if the next harvest continues to be good.
  
  The next strategy for Silver Bird is to continue growing despite the economic downturn, Tan said.
  
  Silver Bird is investing a few million ringgit this year to expand its distribution network from 18,000 point-of-sale outlets throughout Peninsular Malaysia, to over 20,000 by December.
  
  It will also spend between RM3 million and RM5 million on advertising and promotion to strengthen its brand and products, and research and development.
  
  Silver Bird has 25 types of products in its consumer food segment and aims to launch new products every quarterly, Tan said.

26th June 2009. Silver Bird announced fy 2009 Q2 Earnings. It made some 393 thousand.

Aug 5th 2009.

• Silver Bird targets bigger slice of market
  
  By Hamisah Hamid Published: 2009/08/05
  
  BREAD maker Silver Bird Group Bhd (7136), which is on its way to record a full-year profit after three consecutive years of losses, is confident the newly-launched High5 Sure Value 500 bread will contribute significantly to its business.
  
  Silver Bird is aiming to sell about 40,000 loaves a day in the next couple of months and the number is set to increase in subsequent months.
  
  Group managing director Datuk Jackson Tan said the new variant to High5 sandwich bread is already in the market and has been receiving encouraging response.
  
  "We want to increase our market share and sales, especially with our largest stand-alone bakery plant in Southeast Asia. More than one million consumers enjoy our products daily," he told a news conference after the official launch of Sure Value 500 bread loaf in Shah Alam yesterday.
  
  At the ceremony, Domestic Trade, Cooperatives and Consumerism Minister Datuk Seri Ismail Sabri Yaakob was represented by the ministry's deputy secretary-general Daud Tahir. Also present was High5 brand ambassador celebrity Chef Ismail Ahmad.
  
  Tan said High5 bread controls over 20 per cent share of domestic sandwich bread market.
  
  He said Sure Value 500 bread will help the firm achieve a significant share in the sandwich bread segment.
  
  Silver Bird's flagship products are High5 white bread and wholemeal bread, which together account for almost 30 per cent of domestic market.
  
  Within the group, High5 sandwich bread contributes 60 per cent to the consumer products division.
  
  Tan said the new 22-sliced Sure Value 500 bread loaf is retailed at RM2.25 compared with the existing 19-sliced Nutri-White bread loaf which sells forRM2.10.
  
  He said the value-for-money sandwich loaf, which is introduced in conjunction with High5's 10th anniversary, is affordably priced for consumers, considering the current economic downturn.
  
  More than 300 million High5 bread loaves were sold in the domestic market in the last decade.
  
  For the first half of its financial year ended April 30, Silver Bird reported a net profit of RM497,000 on the back of RM305.2 million revenue compared with a net loss of RM16.9 million and RM315 million revenue in the previous corresponding period.
  
  For fiscal year ended October 31 2008, it posted a net loss of RM21.2 million on revenue of RM638.6 million, mainly due to the writeback of impairment loss in 2007

18th Sep 2009. Silver Bird announced its fy 2009 Q3 Earnings. It made some 331 thousand. (Not a lot eh?)

However, I was kind of amused with the following article published the next day.

• Saturday September 19, 2009
  
  Silver Bird Q3 profit up on lower costs
  
  KUALA LUMPUR: Silver Bird Group Bhd registered a pre-tax profit of RM330,000 for the third quarter ended July 31, compared with a pre-tax loss of RM5.56mil in the previous corresponding period.
  
  In an announcement on Bursa Malaysia, Silver Bird said the improved result was due to strong sales by its consumer food division and lower costs.
  
  It said pre-tax profit, however, declined 16% compared with the preceding quarter’s RM392,000 due to the promotional activities.
  
  Revenue fell to RM139.5mil from RM159.4mil mainly due to the 20% fall in revenue of multicom division (telecommunications business) from RM121mil to RM97mil on slowdown in the economy.
  
  The consumer food division’s revenue rose to RM42.9mil in the third quarter from RM38.6mil in the previous corresponding period due to strong market demand, it said.
  
  For the nine-month period, Silver Bird posted a pre-tax profit of RM825,000 compared with a pre-tax loss of RM22.56mil previously. Its revenue declined to RM444.7mil from RM476.3mil. — Bernama

As can be seen, Silver Bird does not have much earnings for OSK to play with. Hence I guess the much 'lowish earnings estimate' from OSK.

As you can see an EPS estimate of 1.6 million equates only an eps of 0.5 sen.

Yeah, an eps of 0.5 sen.

So how does OSK then value the stock?

LOL! They use PBV of 1.2x!

Justifiable?

:P2

Regarding China As A Consumer

Regarding China as a consumer.

• .. At roughly $1.2 trillion in 2008, total Chinese private consumption is only a little more than that of France (around $1.0 trillion) and still less than that of Germany (about $1.3 trillion, not to mention the UK’s $1.4 trillion and Japan’s $3.2 trillion). This fact alone should cause us to be extremely skeptical of feverish claims about the role Chinese consumers can play in making up for any contraction in US consumption – which at roughly $9.4 trillion last year is nearly eight times the size of China’s – without even taking into account that Europe and Japan are likely to exacerbate, rather than help absorb, the contraction in US net demand.

Compared to other Asian countries..

• Even by Asian standards Chinese consumption is off the charts. South Korean and Malaysian consumption is around 50% of GDP (although during and after the Asian crisis Malaysian consumption did drop to around 45% of GDP, before recovering). Other major Asian economies, like India, Japan, Taiwan and Thailand, show consumption in the 55-60% of GDP range. Compared to those numbers China’s 35% is astonishing, even if, as some claim it may be somewhat understated (which by the way may be true of other developing countries).

Those set of comments were taken from Prof Michael Pettis recent posting, The difficult arithmetic of Chinese consumption.

The posting continues..

• What we need is an expansion in Chinese net demand – rebalancing in other words – so that China can adjust to contracting net demand from the US in a way that doesn’t harm trade partners and competitors and rebounds on itself with escalating trade tensions. The way to rebalance is not for consumption to grow, but rather for consumption to grow as a share of GDP. Even if consumption declines, and GDP decline more quickly – a horrible outcome to be sure – rebalancing will occur. The best way of course is for GDP to grow quickly and for consumption to grow even more quickly.
  
  But this is I think what most people miss. Just growth in Chinese consumption alone does not help if it grows in line with GDP, and less so if it grows slower than GDP. In that case the imbalances will get worse, and while the impact on the trade account can be temporarily disguised if investment continues to surge, ultimately it just postpones the needed adjustment (and increases the cost if the investment surge is misallocated).
  
  What kind of consumption growth will we need for the country to rebalance? The numbers are a little worrying. If China grows by 8% a year, consumption would have to grow by a little over 11% to raise the consumption share of GDP from 35% to 36% in one year. It would have to grow by a little over 9 1/2% annually to do it in two years. Consumption, in other words, must grow substantially faster than GDP for the rebalancing even to begin to take place. This is arithmetically true because China begins the process with such a low consumption ratio.
  
  Look at it over the longer term. Just to return consumption to 40% of GDP over the next five years (and even that level is widely considered to be way too low, and probably unprecedented in the world excluding recent Chinese history), 8% average annual growth rates in GDP would require a tad under 11% annual growth in consumption. Similarly, 7% average annual GDP growth rates would require that consumption grow annually over the next five years by nearly 10%. To bring Chinese consumption in 20 years up to 50% of GDP, which is the low end for other high saving Asian countries, and far lower than any other large economy in Asia (and remember that large economies are less able to rely on exports to fuel growth than small countries), 7% annual GDP growth would require average annual consumption growth of just under 9% for twenty years.
  
  In other words while GDP growth slows significantly from its 12-13% rate of the past several years, consumption will nonetheless have to surge at rates far in excess of the 8-9% growth rates of recent years in order for even a small, partial rebalancing to take place. I don’t think I have ever seen a case in which consumption has grown at nearly that rate for any length of time. I believe if China pulled it off it would be unprecedented.
  
  Of course this will not be easy, and I think too many commentators underestimate the magnitude of the problem. China’s rebalancing process will even in the most optimistic of cases take many years before it can even reach the lowest consumption levels reached by other Asian countries that pursued investment-driven policies accompanied by too-low interest rates and undervalued currencies. This will be a long haul, and if I am right – if we need to see a transfer of income back for the state sector to the household sector really to get it going – we should expect much lower GDP growth rates over the next decade than anyone is currently projecting.