As of 2006, China's banks were estimated to hold $900 billion in bad loans, or 40% the nation's annual GDPâand this after China had already spent the equivalent of 25 to 30% of GDP in previous bank bailouts. This lending disaster makes China the home of the world's largest potential banking crisis. Faulty corporate governance is at the heart of this ticking time bomb. A history of low pay, lax supervision, and politicized lending has resulted in loans being made that were doomed from the outset. Beyond the ever-present corruption that plagues the banking system, the biggest problem is the role that Communist Party officials continue to play in lending decisions. Because they are government owned, China's banks report to party bosses rather than to independent boards of directors or to shareholders. The result is a lack of accountability and transparency. Moreover, as tools for government-directed lending, China's banks have little expertise in assessing risk or pricing capital.

State-owned enterprises (SOEs), which tend to be far less efficient than foreign-funded enterprises, account for more than 50% of outstanding bank credit. This figure reflects the fact that banks in China traditionally were required to finance the operations of SOEs, regardless of their profitability or risk. Owing to various obstacles, such as barriers to laying off workers, SOEs find it difficult to reduce their costs. At the same time, because they employ millions of workers, banks face enormous pressure to continue lending to SOEs.

Although the government is unlikely to permit the banking sector to collapse, a healthy banking industry is critical to achieve Beijing's goal of maintaining strong, but more efficient, economic growth. One answer that Beijing has come up with to reform the banking sector is to have its largest state-owned banks launch initial public offerings (IPOs). Beijing's main goal in listing these banks is not to raise cash but rather to subject them to the discipline and scrutiny of financial markets and international regulators that accompany a public listing. According to Fred Hu of Goldman Sachs in Hong Kong, âGiven all the political interference, it is very hard to run the banks on a commercial basis. The first step is to change their ownership, and IPOs are a way to achieve that.â⁹ Similarly, Beijing has made overseas listings a key component of state-owned industrial enterprise reform because they provide companies with pressure from public shareholders to pursue profits and wean themselves from government handouts.

Make a summary with details, and answer this "How can IPOs improve the sorry performance of Chinese banks?"

graywombat249

Assignment Please read the instructions carefully. You need to write 6 sentences for each article which includes what i have given in instructions.

Instructions

For the two articles below:

Write a few sentences explaining how the article is relevant to Verizon or Sprint Mobile. How and why would you expect it to affect stock prices, and whether they were affected in the way you expected (do this in terms of expected future earnings). Because traders buy or sell stocks immediately as new information becomes available, stock prices respond rapidly. Be sure to include the date of the article. You should be able to distinguish whether the news was relevant to only one of your stocks, your industry, or the whole market by noting the relative price changes - if only one of your stocks went up while the market was down, the news affected only your stock; if both your stocks moved differently from the market, the news probably affected your industry as a whole; if your stocks moved in tandem with the market, the news probably broadly affected the whole economy. You should also be able to explain why the news affected just one company, the industry, or the whole market. The articles selected should be balanced chronologically and topically.

article:1 China Aims to Build Its Own Secure Smartphones

State-owned and private tech firms team up to cut cord to U.S. suppliers

An employee inspects a circuit board in a manufacturing facility at ZTE's headquarters in the Nanshan district of Shenzhen, China. Photo: Brent Lewin/Bloomberg News

By

Eva Dou in Beijing and

Juro Osawa in Hong Kong

Updated Nov. 20, 2015 6:02 p.m. ET

China is seeking to make its own secure smartphones, in an attempt to insulate its handsets from U.S. surveillance.

The effort involves both state-owned companies and some of the countryâs savvier technology firms and marks the latest step in Beijingâs quest to build a homegrown tech industry that cuts out U.S. suppliers.

Chinese officials have long chafed at U.S. companiesâ dominance in smartphone operating systems and processorsâthe parts of a handset most vulnerable to hacking. In China, the worldâs largest smartphone market, almost all handsets are either Apple Inc. iPhones or are powered by Googleâs Android operating system.

For years, Chinaâs lagging technology meant there was little it could do. The countryâs first lady, Peng Liyuan, last year switched publicly to a Chinese-made smartphone, the ZTE Nubia Z5, after being criticized for using an iPhone, yet the Chinese device ran on Android and included a Qualcomm Inc. processor, according to its specifications list.

Now, a number of Chinese technology companies are making progress toward cutting the cords to Western technology. China is encouraging that effort, spurred by revelations in 2013 from former U.S. National Security Agency contractor Edward Snowden that the NSA had placed surveillance âback doorsâ in some American gear sold overseas.

Chinese smartphone maker ZTE Corp. is working on a secure smartphone for government agencies using an operating system developed in-house, and a processor chip from a Chinese supplier, a spokesman said. The countryâs largest chip-design company, Spreadtrum Communications Inc., separately said it would begin mass producing a set of chips that run a Chinese operating system by year-end.

Chinese e-commerce company Alibaba Group Holding Ltd. has joined with Chinaâs Ministry of Public Security to develop a mobile operating system for police officers that it bills as more secure.

ENLARGE

A worker examines machinery used to adhere components to smartphone circuit boards at ZTEâs headquarters in Shenzhen, China. Photo: Brent Lewin/Bloomberg News

All of the efforts target a niche group of government agencies and state-owned enterprises and are unlikely to appeal to the average consumer. ZTEâs secure phone, for example, will come without camera, GPS, Wi-Fi and Bluetooth wireless connections to minimize security risks.

The trend is unlikely to have much impact on the market share in China of U.S. mobile components and software. Analyst James Yan of market-research firm IDC estimates secure phones might make up 3% of Chinaâs smartphone sales next year, or about two million units. But if more made-in-China operating systems and processors make their way into consumer handsets, that could potentially pose a challenge for Googleâs Android and for Qualcomm.

Qualcomm, whose processors accounted for 52% of the smartphone market last year, according to Strategy Analytics, declined to comment.

Alphabet Inc. âs Google, whose Android system ran 82.8% of the worldâs smartphones in the second quarter of this year, according to IDC, didnât immediately have a comment.

Other U.S. tech companies already are feeling a chill in China. U.S. networking- and computing-gear makers such as International Business Machines Corp. and Cisco Systems Inc. have recorded sales declines, as government agencies and state-owned enterprises buy more from domestic counterparts such as Chinese server maker Inspur Group Co. and telecommunications-gear supplier Huawei Technologies Co.

Cisco doesnât provide sales figures for specific countries, but has said the Snowden disclosures affected its China sales. IBM has attributed sales setbacks to Chinaâs economic slowdown. Both companies say they donât build âback doorsâ into their technology.

In smartphones, Chinese banks have begun to buy more domestic brands, though formal quotas were suspended earlier this year because of U.S. pressure. China had wanted to require that 50% of new smartphone purchases at financial institutions meet âsecure and controllableâ standards, according to a copy of the suspended rules reviewed by The Wall Street Journal.

Chinaâs push to build homegrown secure handsets also has economic benefits: The components that are crucial to security are also some of the most profitable.

But even with made-in-China processors, modems and operating systems, Chinese secure phones will likely include plenty of foreign components, albeit less-sensitive ones.

A spokesman for ZTE said it isnât possible to use exclusively Chinese-made hardware and software in a smartphone, but to meet the needs of government agencies it is trying to use domestic suppliers as much as possible.

Other Chinese phone makers, including Coolpad Group Ltd. and Qihoo 360 Technology Co. , are scrambling for a piece of the market too, touting security features such as data encryption in their new handsets this year.

âRight now the security sector is very hot,â said Chris DeAngelis, Beijing-based general manager at consultancy Alliance Development Group. âThe government is looking for nonforeign technologies as much as possible to prevent various back doors.â

Leo Li, chief executive of Spreadtrum, said his company will begin sales this year of special chipsets that will let phone users switch between Android and an encrypted operating system made by Chinese company Yuanxin Technology Co.

âYour voice is encrypted. Your data is encrypted. It is very secure,â he said.

But just because a phone has domestically made guts doesnât mean it is secure, said Bryce Boland, Asia chief technology officer for network-security company FireEye Inc. A hacker could still siphon data directly from a telecom operator, he said. New operating systems are also likely to have more vulnerabilities.

China isnât alone in seeking a high-security smartphone for government work. The U.S. NSA developed its own domestic version in 2009, although it this year switched to a new system based on Samsung Electronics Co. smartphones with customized secure software. The NSA-developed phone was âovertaken by technology by the time it was actually delivered,â Debora Plunkett, the NSAâs information assurance director, told National Defense Magazine in 2012.

Lao Yao, secretary-general of the China Smartphone Alliance, said some Western governments work with BlackBerry Ltd. of Canada to custom make high-security phones for their officials, but that China and Western companies donât trust each other enough for this to be an option. âChina has no choice but to develop its own operating system to maintain security,â he said.

âGillian Wong in Beijing contributed to this article.

Write to Eva Dou at [email protected] and Juro Osawa at [email protected]

article 2: Sprint to Get Cash Infusion With Deal to Sell and Lease Back Devices

Transaction, for $1.1 billion, would essentially act as a loan

ENLARGE

Sprint, the No. 4 wireless carrier in the U.S. by subscribers, has been working to improve its network. Photo: mike blake/Reuters

By

Ezequiel Minaya and

Ryan Knutson

Updated Nov. 20, 2015 1:54 p.m. ET

Sprint Corp. took a big, if unusual, step on Friday to address its cash woes and take some risk off its books.

The carrier, which has been losing customers and money for years, said it would get a $1.1 billion cash infusion through a deal to sell certain handsets and other devices it has leased to its customers. The purchaser is a newly formed entityâbacked by Sprint parent SoftBank Group Corp.âthat will rent the devices back to the carrier.

Sprint said the transaction essentially serves as a loan that will cost it less than tapping debt markets, freeing up much-needed resources for network investment and operations.

Sprint, the No. 4 wireless carrier in the U.S. by subscribers, has struggled with competition and a difficult network overhaul. Its network has improved recently, and in the most recent quarter, Sprint added 237,000 of the more desirable postpaid phone subscribers, although 199,000 of those came from converting its own customers from prepaid arrangements. In an effort to boost subscriber gains, Sprint also launched a promotion this week to sell wireless service for half the price charged by rivals.

The carrier, which is based in Overland Park, Kan., has more than $30 billion in total debt, and hasnât posted an annual profit since 2006. It reported a loss of $585 million for its latest quarter. In September, Moodyâs downgraded Sprintâs bonds to B3, citing concerns about the companyâs turnaround plan. The carrier has said it has no plans to tap debt or equity markets in the foreseeable future.

The deal to sell 2.5 million device leases to the new entity, called Mobile Leasing Solutions LLC, will help reduce one of Sprintâs biggest expenses: the cost of purchasing millions of new iPhones and other devices. The carrier in turn leases them to individual subscribers, who must either return the phone at the end of the lease or pay extra to buy it outright.

Sprintâs relationship with SoftBank, which owns more than 80% of Sprint, as well as with phone-distribution firm Brightstar Corp., which was founded by Sprintâs CEO, helps give the carrier access to favorable terms on the deal with Mobile Leasing Solutions. The latter was formed by a group of equity investors including SoftBank, and has secured debt financing from several lenders, including international banks and leasing companies.

Sprint Chief Financial Officer Tarek Robbiati said Sprint expects to execute additional deals roughly every quarter, and is also working on a similar structure to finance network construction. Mr. Robbiati said the implied cost of funds was in the âmid-single digits,â which is well below the carrierâs high-yield alternatives, although he wouldnât provide a specific number.

Reaction to the deal was mixed. Analysts at Evercore said they were âcautious of whether the deal improves [Sprintâs] actual business model or instead just moves some of the risk off balance sheet.â Analysts at Macquarie Securities said the deal was âa major positive for Sprint sharesâ and would dramatically improve the companyâs cash-burn rate, helping it focus on new growth.

Sprint shares fell more than 5% on Friday.

The newly formed entity will rely on Brightstar to resell the used devices at the end of each lease. Sprint said it envisions the deal including only high-end devices, which have the highest resale value. Used phones are easily sold in developing markets overseas; they are also useful for insurance programs that replace broken phones.

In the wake of the deal, Sprint revised its annual outlook for adjusted earnings before interest, depreciation, taxes and amortization to a range between $6.8 billion and $7.1 billion, down from a previous forecast of $7.2 billion to $7.6 billion. The transaction is expected to close in early December.

Write to Ezequiel Minaya at [email protected] and Ryan Knutson at [email protected]