BEIJING (AP) — China’s government on Friday rejected a U.S. antidumping ruling against its makers of solar power equipment and Chinese manufacturers warned possible higher tariffs might hurt efforts to promote clean energy.

The conflict has worsened U.S.-Chinese trade tensions. The two governments have pledged to cooperate in developing renewable energy but accuse each other of violating free-trade pledges by subsidizing their own manufacturers.

“The U.S. ruling is unfair, and the Chinese side expresses its extreme dissatisfaction,” said a Commerce Ministry spokesman, Shen Danyang, in a statement.

Shen warned the ruling might harm clean energy cooperation but gave no indication how Beijing might respond. Some American companies that oppose the trade probe have warned China might retaliate against U.S. suppliers.

Thursday’s preliminary ruling by the Commerce Department said Chinese producers sold solar cells and panels below fair price and hurt American producers. If that is upheld, tariffs averaging 31 percent could be imposed on Chinese solar-panel imports.

Three major Chinese manufacturers — Yingli Green Energy Holdings Ltd., Suntech Power Holdings Co. and Trina Solar Ltd. — rejected accusations they were selling goods at improperly low prices.

Foreign competitors complain Chinese manufacturers get improper government support in the form of low-cost access to land, bank loans and other resources. Beijing acknowledges giving research grants and tax breaks but says those are in line with its free-trade commitments and practices by other governments.

“We will challenge with data all of those assumptions,” said Trina’s chief commercial officer, Mark Kingsley. In an interview, he said China’s subsidies are lower than those provided by Germany and some other countries.

Kingsley said Trina’s exports to the United States are unlikely to be affected if Washington raises tariffs. He said any solar cells or other parts affected by the duties can be replaced by components from other countries.

“We already have developed third-country component supply that allows to ship as normal to the U.S.,” he said.

Chinese producers also warned that higher U.S. tariffs might raise the cost of solar equipment and hamper efforts to promote renewable energy.

“Tariffs are disruptive and destructive for the entire solar industry,” said Yingli’s chairman, Miao Liangsheng, in a statement.

The Commerce Department launched its investigation in November following complaints by a group of U.S. producers led by Oregon-based SolarWorld Industries America Inc., a unit of Germany’s SolarWorld AG.

The complaints were amplified by the bankruptcy of solar-panel maker Solyndra LLC after the California-based company received a $528 million U.S. government loan. Solyndra cited Chinese competition as one reason behind its failure.

Beijing responded by launching its own probe last November into whether U.S. government support for producers of wind, solar and other renewable energy technology is an improper trade barrier.

The dispute highlights tensions over whether China’s heavily regulated economy should be treated as a free market. Beijing has pressed the United States and Europe to officially grant such status, which would make it harder to bring some dumping and other complaints, but none of its major trading partners has yet agreed.

With China treated as a non-market economy, U.S. regulators looked at other countries to decide what production costs for Chinese solar equipment manufacturers would be and estimate how much government support they received.

Shen, the Commerce Ministry spokesman, criticized that approach and said it resulted in an unfairly high comparison price.

“This is not consistent with China’s development status, does not conform to the facts of China as a market economy and highlights the tendency of trade protectionism in the United States,” Shen said.

Chinese solar equipment manufacturers warned earlier that sanctions could result in a loss of American jobs because U.S. companies are both buyers of Chinese products and suppliers of materials. They said Chinese manufacturers spend some $2 billion a year to buy materials such as polysilicon from U.S. suppliers.

Kingsley said Trina buys silicon from Michigan and manufacturing equipment from New Hampshire, plastic and glass from Japan and South Korea and other components from suppliers elsewhere in Asia.

“These products, by design, are incredibly international,” he said. “The vast majority of this value chain is not in China.”

___

Online:

Suntech Power Holdings Ltd.: http://www.suntech-power.com

Yingli Green Energy Holding Co.: http://www.yinglisolar.com

Trina Solar Ltd.: http://www.trinasolar.com

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NEW YORK (AP) — A company started in a Harvard dorm room in 2004 has just raised $16 billion and is valued at $104 billion. All that from an initial public offering of stock.

But taking a company public isn’t as simple as clicking on “like.” Even for Facebook.

When the social media company’s stock starts trading Friday under the symbol FB, buyer demand is expected to explode. At its initial offering price of $38 a share, the 8-year-old upstart is now worth more than established heavyweights Disney and Kraft.

The nearly $16 billion raised in the IPO will flow to the company and its early investors.

As with any initial offering, Facebook’s IPO follows lots of negotiation — over price, paperwork, selling and buying. Here are some questions and answers about its public debut:

Q: So why is Facebook going public?

A: The same reason many other fast-growing companies do: to raise money. Selling stock to the public gives companies money to run their businesses, expand and buy other companies. Sometimes companies go public even if they have no plans for the money. Facebook says it wants to establish a public market for its shares in case it needs to raise money from investors in the future.

Q: What happens in an IPO?

A: The company sells ownership stakes to the public for the first time. Facebook plans to sell up to 421 million shares. That represents a 15 percent stake in the company. The sale is expected to raise $16 billion.

Q: Who owns shares of Facebook now?

A: Well-connected investors, employees and top insiders like company directors. They are selling 241 million shares, or more than half the total being sold. The company has said it’s selling shares at $38 each. At that price, those early owners will pocket $9 billion, or an average of $230 million each. The company will get $7 billion.

Q: Who will buy the shares?

A: In an IPO, there are two buyers. The first are the investment banks that helped the company file IPO documents with regulators and contacted pension funds, mutual funds and other big institutions to gauge a price for the shares. These investment banks are called underwriters. In Facebook’s case, 33 banks are helping out; Morgan Stanley has the lead role. The underwriters guarantee to the company that they’ll buy all of the shares at the IPO price.

Q: When do the underwriters buy the shares?

A: Before shares start trading publicly. Facebook’s underwriters were expected to buy all the sellers’ shares Thursday night. But first, the underwriters had to negotiate a price with a second group of buyers — the institutions that will buy the shares from them. They did that Thursday night, settling on a price of $38. In a document filed with regulators this week, Facebook had estimated that the price would be between $34 and $38.

Q: Is this negotiated price the IPO price?

A: Yes. But that’s not what the underwriters pay the company and insiders. After settling on an IPO price, the underwriters subtract a commission for their work. With big IPOs like Facebook’s, that’s typically 3 percent. At $38, that would mean Morgan Stanley and the other Facebook underwriters would get $1.14 off for each share. They’d pay $36.86 a share. Underwriters have five days to transfer the money to the company and other sellers.

Q: What do the underwriters do with their shares?

A: They sell them to big institutions, along with some favored individual investors, before public trading starts. They do this usually the night before. In Facebook’s case, all of the underwriters’ shares are expected to be sold by Friday morning before the stock exchanges open at 9:30 a.m. in New York.

Q: Is that when trading of Facebook begins?

A: No. The new owners who want to sell their Facebook shares must call their traders first. The traders will call “market makers” at the Nasdaq stock market, where Facebook’s shares will be listed. Market makers are firms that agree to hold shares in a company so buyers and sellers can easily trade them. The market makers negotiate among themselves to find a price between what most buyers and sellers are demanding. That can take up to two hours, after which the first Facebook shares will exchange hands. The price will appear under the symbol FB.

Q: I read that Facebook will be worth more than $100 billion after the IPO. What does that mean?

This is the so-called market value of the company. It’s what investors trading a portion of its shares think the whole company would be worth if all its shares were trading. At $38 per share, Facebook would be worth $104 billion.

Q: Who are the early investors who are selling?

A: One of the biggest is DST Global Ltd., a London firm founded by Russian investor Yuri Milner that first invested in Facebook in 2009. DST and its affiliates plan to sell 45.7 million shares. At $38, Milner’s firm would get $1.74 billion. One of the earliest investors, Reid Hoffman, a co-founder of LinkedIn Corp. who put money into Facebook in 2004, is expected to sell stock worth up to $36 million. Other sellers include Goldman Sachs, which invested last year. It expects to get as much as $1.1 billion for its shares.

Q: What about Mark Zuckerberg?

The Facebook CEO plans to sell 30.2 million shares. He would pocket up to $1.15 billion. Part of Zuckerberg’s holdings include special shares that give him voting rights on shareholder proposals. After the IPO, he will control 56 percent of votes.

Q: Where will the Facebook IPO rank among IPOs?

A: In terms of money raised, it will be the third-biggest U.S. IPO in history, edging out AT&T Wireless. That company’s IPO in 2000 raised $10.6 billion according to Renaissance Capital, an IPO advisory firm. The biggest IPO was Visa Inc. in 2008. It raised $17.8 billion.

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A sub-7% GDP growth is very easily reached.  In fact, I have noted previously that using the quarter-on-quarter data, the annualised growth rate has slowed to just 7.4%.  We only need the economy to grow a little bit slower to reach that.

Given how close it is to the so-called hard landing, it is interesting that many still refused to believe the possibility of a sub-7% growth.  Perhaps some have been prepared for such a growth figure, it might be fair to say that the market consensus has not thought about anything more severe than a growth figure between 5-7%.

The calculations below take the rough percentage of different components’ contribution to GDP as the starting point, and make different assumptions about how each component grows or shrinks from the starting point.  The calculations below are not meant to be very precise, but is meant to show that it is very easy to get growth rates way below what even bears are contemplating.  In particular, we should note that because investments are such a big portion of the economy, even a modest contraction in investments can be hard for other parts of the economy to offset.

Starting point: assuming that annual GDP in nominal term ~ RMB49 trillion

The contributions of each part of component of the GDP, roughly, are as follow (note again that this is not meant to be very precise):

Investment contributes roughly 50% of GDP

Private consumption contributes roughly 34% of GDP

Government consumption contributes roughly 14% of GDP

Trade Balance contributes roughly 2% of GDP

While I am expecting a deflationary scenario for the Chinese economy, for simplicity sake, the calculations below assume that there is no inflation nor deflation.  That is the nominal growth will be the same as real growth.

The not-so-severe assumptions

Among investment, parts of it are real estate, which accounts for 10% of GDP.  As we noted that new housing start is down this year, it is no longer unreasonable to assume negative growth for this portion of the economy going forward.  Let us assume a 10% drop for the next 4 quarters compared to the previous 4 quarters.  Other parts of the investment will also be affected, although the magnitude of the negative would be hard to quantify.  Let us assume that investments excluding real estate would fall by 5% in the next 4 quarters.

For private sector consumption, with slower economy, growth in retail sales growth has been slowing.  If the trend continues, we should not be surprised if retail sales growth (assuming that it’s a good indication of private consumption in the GDP calculation), which currently stands at 14.1% in nominal term (10.7% in real term), to fall to single digit.  Assuming that the growth for the next 4 quarters, on average, is 8% compared to the previous 4 quarters (Note that this is not a particularly severe slowdown assumption in consumption).

For the government spending, while it is theoretically possible to increase it so that GDP can be sustain, let us for a moment assume that the level of government spending remains totally unchanged.

For trade, it would be reasonable to assume sharp and sustained fall in exports, particularly in Europe.  But trade balance could remain more or less stable because on the other side, imports demand will also be falling substantially because of falling domestic demand.  Thus let us assume that trade balance will not grow nor shrink for the next 4 quarters.

The resulting overall GDP growth, unfortunately, even under this not-so-aggressively-bearish scenario, is –0.3%.

More severe assumption 1: private consumption no longer grow

Because of the fall in housing prices, and as said previously that housing has a larger wealth effect on consumption, it is not unreasonable to assume that consumption is not growth at all.  All else being equal, with consumption growth slowed to 0%, the resulting GDP growth is –3.0%.

More severe assumption 2: not only real estate investments fall by 10%, other investments also falls by 10%

Even more sever assumption: now even consumption starts to fall

Bullish assumption: Government to save the day, reversing part of the fall in investments, while consumption grows at 10%

The government, of course, can increased spending to give the economy a boost.  Assume that government consumption expenditure is increased by 15% to offset the contraction in investments and to support consumption, under this particular set of assumptions, GDP growth would only be 4%.

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Here’s an interesting paragraph from Nomura’s Americas Morning Comment today…

Assuming no shock announcements from Greece (where opinion polls are looking more constructive from a market perspective) or elsewhere, investors who made the right call this week may well looking to book some profits today, especially given the G8 meeting at Camp David this weekend. The chances of something coming out of this that really changes the big picture seems unlikely to us, but we expect supportive noises to be made and it should help the profit-taking vibe which may be settling in. If that does lead to a more meaningful retracement of moves over the course of today or Monday, then there could be an opportunity to set further risk shorts or bond longs, we think.

Indeed, momentum for the left-wing SYRIZA party — which would be in sharp conflict with the rest of Europe on how to proceed — may be stalling out. A couple of new polls have the conservative New Democracy party leading, and a report in Ekathimerini suggests that New Democracy is shoring up its coalition.

The Greeks want change, but they don’t want to leave the Euro, and if it looks like SYRIZA’s leader Alexis Tsipras is overplaying his hand, and risking a GREXIT, then he may get punished.

Still a long time to go before the elections, but every little tilt will have exagerrated impacts on the market… hence the big surge in European banks today.

SEE ALSO: This is what happens if Greece leaves the Euro >

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However, there are massacres happening in this market if you look at the right places, and especially if you look at some areas which are very economically sensitive.

Check out a chart of BP, which is getting hit by the double whammy of a slowing economy and falling oil.

We’re talking about a third of the company gone.

Or check out how severe the fall in the basic materials stocks have been.

Not quite as bad overall, but pretty brutal lately.

Or check out Morgan Stanley, which was behaving really worrisome last year.

That’s a fall of 39% from the recent highs.

For some international flavor, check out the 27% decline for Brazil over the last few months.

Bottom line again: If you’re just looking at the headline S&P 500 decline, you’re missing some real bloodshed in some key parts of the overall picture.

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Yesterday we wrote about Bankia, the Spanish bank that was subject to reports of $1.3 billion in deposit flights.

Anyway, at one point it was down over 20%, before ending down about 10%.

Well today the mood is different. And the stock… is up over 26%!

That’s redolent of a lot of European banks, which are all booming today.

The amount of optionality in the sector is huge right now. They’re all trading at such distressed levels that just the slightest bit of positive vibes (the sense that maybe the world isn’t going to collapse) sends them all moon-bound. Then of course the next day they collapse again.

Amusing, too, that this comes after last night’s big downgrade of Spanish banks and a report that bad loans at Spanish banks have hit an all-time high. But then that always seems to happen this way.

SEE ALSO: This is what happens if Greece exits the euro >

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I still don’t think the USA is on the verge of a renewed recession, but I know the risks are rising.  My worst fear is that all this chatter of a “fiscal cliff” is paralyzing corporate America to the point where business investment is going to come to a halt from its current crawl.  The one really positive sign in recent quarters has been the continued recovery in business investment paired with the government budget deficit.  This is all part of the balance sheet recession healing process.  But we’re at serious risk of this process coming to a stop.  And recent rhetoric out of Congress regarding the debt ceiling isn’t helping matters.  So I admit that the risks of recession are certainly rising, but the data isn’t there yet to convince me that my long-standing “no recession” call needs to be changed.

As for the markets – it’s a mess out there.  Messier than I thought they’d be.  And that’s coming from a guy who was building a short position all the way up to SP 1420.   But I was a buyer in small bits on Thursday.  My indicators aren’t raging bullish, but I do think we’re beginning to see some fear levels and market action that is generally consistent with a market that is a bit overdone on the downside.  We’re seeing lots of extremes in different markets with the Euro tanking, Treasuries spiking and equities getting bludgeoned in a matter of weeks.  The bears are betting on a worst case scenario and if Europe stays true to their actions of the last few years the bears will once again find themselves on the wrong side of the trade resulting in a rip your face off style move against them.  I wouldn’t get wildly bullish here because the worst case scenario is certainly not off the table.  But from a risk management perspective I certainly feel better about owning equities 8% cheaper than they were just a few weeks ago….

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In a balance sheet recession, as is happening now, the dire effects of debt deleveraging overwhelm the efforts of the government to stimulate the economy.  Periods of credit crises are almost always followed by many years of below average growth, high unemployment, anemic expansions and frequent recessions.   Recent examples include Japan’s two-decade period of sluggish growth and the current tepid recovery in the U.S. In our view, working our way out of the mountain of debt, both private and public, that was incurred during the boom will take many years and will keep a solid lid on overall gains in the stock market.

The current economic recovery remains in sharp contrast to any other expansion of the post-war period, and is now showing definitive signs of petering out once more. The recently reported first quarter GDP is a mere 1.3% above the amount reached at the peak of the last cycle in the fourth quarter of 2007. In eight previous post-war expansions, GDP had increased by an average of 13.3% in the 17th quarter following a peak, with the lowest being 10.5%.

Now, even this tepid recovery is slowing down once more. In the last two months the overwhelming weight of the evidence supports this view, as the following indicators have either come in below expectations or suffered an actual downturn: core durable goods orders, the Chicago Fed National Activities Index, new home sales, existing home sales, payroll employment, the NFIB Small Business Index, construction spending, the ISM Non-Manufacturing Index, the Kansas City Fed Index, the Philadelphia Fed Survey, industrial production, the Empire State Manufacturing Index, the NAHB Housing Index, the ADP payrolls, auto sales, real disposable income and the GDP. 

At best, we think the economy will be disappointing in the period ahead. Consumers, who account for about 70% of GDP, are hamstrung by debt. In addition they have kept up their spending only by running their savings rate back down to 3.8% of disposable income, only the fifth month below 4% since 2007. Other limiting factors are low wage growth, high unemployment, the large numbers of workers who have dropped out of the labor force, declining home prices, higher tax payments and a flattening out of transfer payments.  Therefore it no wonder that consumer confidence still remains at recessionary levels.

Still ahead is the so-called “fiscal cliff”, another conflict as we approach the debt ceiling again, a contentious election, and the continued inability of a dysfunctional congress to get anything done. All in all this is not a political outlook that is likely to give investors any confidence in the period ahead.

Adding to the headwinds is the worrying state of the global economy. Europe is plunging into recession with the fragile consensus unraveling with the fall of the Dutch government, the election of a left-of-center government in France and the indecisive results pending the new election in Greece.  For more than two years the goal of European leaders has been to prevent the Greek crisis from spreading to other southern-tier nations.  After innumerable meetings, agreements and bailouts, that attempt has seemingly failed with the increased vulnerability of the Spanish financial system.  Most of Europe has now plunged into recession, an event with global implications, as Europe is the largest source of Chinese exports. 

China is dealing with a speculative housing boom and a major political scandal prior to a change in leadership to a new generation.  Even the suspect official economic statistics have been indicating a slowdown in the economy, while other evidence indicates that the situation may be worse than the official numbers show.  China’s economy is heavily based on exports and is extremely vulnerable to slowdowns or recessions in other major economies.  India is experiencing a similar deceleration of growth.  In the last few years China and India have accounted for the lion’s share of global growth, and any slowdown has major implications for the overall global economy.

We believe that the numerous headwinds to economic growth are creating substantial downside risks to the economy and corporate earnings that, until  recently,  were not being appropriately discounted by an increasingly euphoric stock market. We believe that the correction is only the beginning of a major downturn.  At current levels the downside risks are still far greater than the potential upside rewards.

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A rare occurrence. Markets aren’t going down much yet.

After several days of bloodshed, Europe is not falling too much by which we mean, Italy is slipping 0.15% and Spain is down 0.05%, and Germany is down 0.6%. Greece is actually up 0.4%.

US futures are ticking modestly higher ahead of that huge IPO that everybody knows bout.

Other than that, there isn’t too much news. Italian industrial orders came in surprisingly strong.

Stepping back a moment, it was very bad in Asia: Japan fell 2.99%, Hong Kong lost 1.4%.

Meanwhile, European banks (especially Spanish ones) are having a huge day >

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Markets are tanking early in the Asian trading session.

This follows a big sell-off in the U.S. on Thursday.

After the U.S. close, Moody’s downgraded 16 Spanish banks.  To make things worse, the world continues feel uneasy about a possible Greek exit from the Eurozone.

See Also – GET READY: This Is What Happens If Greece Exits The Euro >

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