Caixin Business English 06 财新商业英语进阶计划 06

重点词汇：

Iron ore

（n.）铁矿石。现有技术和经济条件下能提炼出铁的含铁岩石。

铁矿石是主要的钢铁冶金原料，钢铁被广泛应用于建筑、基础设施材料及机械、汽车船只、电气设备等制造业。以贸易额计算，铁矿石是仅次于原油的全球第二大大宗商品。中国是全球最大的铁矿石消费国和进口国。铁矿石的定价主要参考普氏铁矿石指数（Platts），但同时受到其他多个因素影响，该指数是多数中国钢厂与国际铁矿石供应商现货结算的主要参考指数。

例句：Simandou, a 110-kilometer range of hills deep in the hinterland of Guinea in Western Africa, boasts the world’s largest untapped iron ore reserves.

翻译：西芒杜铁矿床深处西非国家几内亚腹地，长达110公里的山脉中蕴藏着目前全球最大的未开采铁矿石储量。

To learn how the phrase is used in English reporting, please click here.

Gross profit margin

（n.）毛利率。毛利占销售收入或营业收入的百分比。

毛利是销售收入或营业收入和与之相对应的销售成本或营业成本之间的差额。毛利率是净利率的基础，是衡量盈利能力的基本指标，毛利率越高说明企业销售或营业成本在收入净额中所占的比重越小，企业控制成本的能力越强，盈利能力也就越强。

例句：Given that the online education player was so generous with its tuition even though its expenses continued to grow during the pandemic, Koolearn’s gross profit margin fell to nearly 46% in the 12 months to late May.

翻译：在线教育企业在肺炎疫情期间支出不断上升，又向学生提供了大量免费课程。截至5月底，2020年上半年新东方在线的毛利率在下降了约46％。

To learn how the phrase is used in English reporting, please click here.

Sovereign wealth fund

（n.）主权财富基金。由主权国家政府建立并拥有，用于长期投资的金融资产或基金。

主权财富与私人财富对应，是一国政府通过特定税收与预算分配、自然资源收入或国际收支外汇盈余等方式积累形成的，由政府控制与支配的，通常以外币形式持有的公共财富。主权财富基金一般由专门的投资机构管理，在全球范围内进行投资。通常考虑资产长期投资价值并采取积极的管理方式，以实现投资回报最大化的目标。

例句 ：Regulators have given more foreign firms the once-off-limits opportunity to manage Chinese people’s money by approving a joint venture of asset management heavyweight BlackRock and Singapore’s sovereign wealth fund.

翻译：监管部门批准了资产管理巨头贝莱德和新加坡主权财富基金的合资企业，为更多外国公司提供了管理中国个人投资者资金的一次性机会。

To learn how the phrase is used in English reporting, please click here.

DOUG: Hello and ni hao!

This is the Caixin China Biz Roundup broadcast every week day from Beijing with the essential news for everything you need to know about China and the world of business – plus a little bit more.

I’m Doug Young

Nandini: And I’m Nandini Venkata

DOUG: Coming up on today’s show. The banking regulator sounds the alarm about the country nearing its limit on bad loans（不良贷款） to small businesses. Also, we discuss why despite all the hype about online education amid the coronavirus outbreak, business isn’t exactly booming for these companies. Plus, health authorities say China has been giving medical personnel and other at-risk workers an experimental covid-19 vaccine for over a month.

But we kick off the show with Caixin Global’s cover Story focusing on China Africa relations and specifically mining.

NANDINI: Africa-China relations is always a hot topic but as they always say Africa is not a single country and this is a massive issue. So what part are you going to focus on?

DOUG: You are of course 100% right. Africa is home to 56 different, unique countries. I want to focus on iron ore mining and specifically Guinea. And while I want to avoid making any sweeping generalizations I do think the story may provide valuable insights into China Africa relations in general.

NANADINI: OK, So tell me what’s going on.

DOUG: Simandou, a 110-kilometer range of hills deep in the hinterland of Guinea in Western Africa, boasts the world’s largest untapped iron ore reserves. This one part of Africa could literally reshape the global supply chain（全球供应链） of the critical ingredient of steel, the world’s second-most traded commodity（商品） behind crude oil.

But the deposits are not easy to mine, and currently once mined they are not easy to transport to the rest of the world. Developing the mine could save China, the world’s largest steelmaking country, billions of dollars a year.

But building the necessary infrastructure in Guinea would also cost billions of dollars. To make the Simandou project operational would require railway and port construction amounting to the largest infrastructure project ever in Africa.

NANDINI: So let me guess China is sweeping in to make it work.

DOUG: If I was trying to avoid generalizations at the start then the answer to that is a definite “yes” but with a lot of caveats.

China is the largest importer of iron ore. Its heavy reliance on foreign supply makes Chinese steelmakers especially vulnerable to fluctuations in prices. Every $10 increase of the price of a ton of iron ore adds an extra $10 billion of spending by China every year. So it is really in China’s interests to find a cheap and stable supply of the commodity.

Since May, china’s largest steel refinery, Baowu, has been trying to lead a consortium of steelmakers to invest in Simandou and develop the necessary infrastructure. Caixin has learned that Baowu plans to set up a $6 billion investment fund consisting of steelmakers and financial investors to develop Simandou.

NANDINI: OK, so problem solved. Guinea has the largest deposit of high quality iron ore but lacks the money to invest in the infrastructure to make it viable. China wants the iron ore and so will invest in the infrastructure to make it work. Everyone is happy. OK do you want to hear my top story now

DOUG: Not so fast – this is where the story gets interesting and might hold wider lessons for China Africa relations. The Baowu project is no sure thing. Chinese investors including state-owned aluminum giant Aluminum Corp. of China tried to develop the project years ago with little progress to show for it. And Chinese companies have a poor track record of investing in foreign mining. The painful example is the Sino iron project in Australia. After Chinese state-owned conglomerate Citic Ltd. paid $450 million for 25 years of mining rights to the iron ore deposit at Cape Preston in 2006, it quickly turned into a money pit because of repeated production delays and skyrocketing costs.

Now, like I said at the start this is all part of our cover story – so for all the details of the challenges facing the project head online for our story that covers investments, logistics（物流）, coordinating several companies and financial institutions and of course what is in the interests of Guinea itself.

NANDINI: You can’t just leave us with – read the rest of the story online – for those of us who are time poor can you just tell us why you picked this as your top story and are there any other key facts I need to know?

DOUG: OK, the reason I picked this as my top story is that it highlights how fraught with difficulties China’s investment in parts of Africa really are. The bit I haven’t talked about is the timeframe one needs to think about with regards to any returns on these types of investments.

Analysts think it could take as long as eight years for the necessary infrastructure at Simandou to be completed and even start delivery.

And then this is the irony of the whole project. For the investment to make sense iron-ore prices need to stay at a high price – relatively speaking. But one analyst said to Caixin quote: “Once Simandou starts production, international iron ore prices will be slashed, hurting investors’ interests.”

So this one story really illustrates how rich parts of Africa potentially are. But it also shows the challenges of realising that potential, while at the same time vividly showing the risks for investors like China.

Ok, thanks Doug! Well, my big story is about how Koolearn, the online arm of one of China’s leading education services providers, has taken quite a hit amid the covid-19 pandemic.

DOUG: What do you mean?

Wow, Doug, going straight for those hard-hitting questions.

Well, while there’s no doubt that online education has definitely been getting a lot of attention, the companies in the sector haven’t exactly been drowning in cash. That’s largely down to two reasons. First of all, competition in the sector is increasingly cutthroat. Therefore, to get ahead of rivals, a lot of online education providers have opted to charge modest or even no tuition fees. And the second big reason why these companies have barely charged their customers any money is because they don’t want to appear to be profiting from the pandemic, what with schools suddenly being closed and students depending on online lessons for their education. Appearing to profit from the public health crisis clearly would not be good for their image.

DOUG: So where does Koolearn come into all of this?

Following the coronavirus crisis eruption, the top online education player decided to offer free classes to quote “a significant number of students” endquote. Koolearn says that it made this move to ease the strain that many households felt when their children’s schools were abruptly closed and all education was moved online.

However, the company seems to acknowledge that the donation of free courses wasn’t sustainable for its business in the long run. That realization lead Koolearn to eventually quote “increase our cost of revenue as we have had to further invest in underlying infrastructure and human resources（人力资源） to meet the surge in demand in time and students using our products and services,” endquote.

DOUG: So noble as Koolearn’s decision may have appeared, it didn’t really pay off for the company?That unfortunately seems to be the case. The company actually suffered painful losses during the first half of the year. Given that the online education player was so generous with its tuition even though its expenses continued to grow during the pandemic, Koolearn’s gross profit margin（毛利率） fell to nearly 46% in the 12 months to late May. In fact, according to Caixin calculations, Koolearn’s net loss for the six months through May 31 ballooned to 671 million yuan from an 89 million yuan loss in the year-ago period.

And Koolearn isn’t the only one to have learned such an uncool lesson amid the coronavirus outbreak. Many of China’s other online education firms similarly swung deeper into the red as the pandemic worsened an already intensely competitive climate. The smaller OneSmart International Education posted a net loss of 454 million yuan in the three months through the end of May, reversing a 109 million yuan profit a year earlier. Rise Education also swung into the loss column for the three months through the end of June, posting a 58 million yuan loss for the three month period versus a 21.2 million yuan profit a year earlier.

DOUG: And why is this top story?

Well, at a first glance, many of us would assume that business right now would be booming for a top online education player like Koolearn. After all, the coronavirus outbreak has forced schools worldwide to shut their campuses to lower the risk of infection, leading waves of students nationwide to resort to virtual classes. But, as Koolearn’s example demonstrates, 2020 hasn’t exactly been a boon for such companies. So even though the industry appears to be white hot at the moment, it been far from smooth sailing for businesses in the sector.

DOUG: Ok, thanks Nandini.

Well, speaking of things being far from smooth sailing, my next essential story is also pretty bleak. The big news is that China may soon be approaching its limit on nonperforming small business loans.

However, at the same time, the regulator is also calling for ongoing credit support to help businesses keep afloat amid the Covid-19 pandemic.

Ok, that definitely sounds pretty gloomy. But, before we get to grips with the details, could you give us a brief explainer about what a non-performing loan（不良贷款） is?

DOUG: Sure. In essence, a loan can be described as nonperforming if the borrower defaults（违约） on the scheduled payments over a specified period of time.

Alright. So why does China expect a rise in nonperforming loans? Is the coronavirus somehow behind this?

DOUG: Of course, the coronavirus is behind this.

In the wake of the pandemic, China has repeatedly warned about a surge in such bad loans looming on the horizon. That’s because many businesses and individuals will struggle to repay their debt amid the virus fallout.

Indeed, in an interview earlier this month, Guo Shuqing, who serves as the chairman of the China Banking and Insurance Regulatory Commission, said that he expects nonperforming assets to continue to rise. That’s because the total amount of bad loans has not fully manifested itself since certain businesses have been allowed to roll over their loans or delay repayment under policies meant to cushion the economic impact of Covid-19.

So what exactly is going on in China when it comes to such bad loans?

DOUG: Well, according to the banking regulator, things are looking pretty grim. That’s because the country’s ratio of nonperforming small business loans is approaching a critical tipping point known as the pre-set “tolerance limit”.

What’s especially causing concern is the enormous outstanding value of nonperforming “inclusive” loans to small and micro businesses. These can be defined as loans to businesses with credit lines of less than 10 million yuan or $1.4 million. According to the banking regulator, as of late June, such nonperforming inclusive loans soared to 400 billion yuan, rising over 9% since the start of the year.

On top of that the nonperforming loan ratio（不良贷款比率） for China’s banking sector overall grew to 2.1% over the first half of the year, up 0.08 percentage points from the beginning of 2020.

What steps is China taking to handle the situation?

DOUG: The country has taken a number of steps to cushion the blow caused by these bad loans. For instance, banks have been instructed to accommodate businesses and individuals who have had difficulty repaying their debt. The state has also injected liquidity into the financial system in an effort to channel more funds to ailing businesses. Furthermore, the banking regulator’s chairman says that since early 2020, banking institutions have extended repayment periods on the principal（本金） and interest（利息） of 2.46 trillion yuan in loans for small and midsize companies and foreign trade enterprises.

In order to defuse further risks, policymakers have also allowed 18 provincial-level governments to recapitalize some small and midsize banks with up to 200 billion yuan raised from the sale of local government bonds（地方政府债券）. There has also been talk of the banking watchdog loosening proposed regulations for how commercial banks（商业银行） classify their nonperforming assets. Such a measure may ease some financial stress on banks.

Alright, well last but definitely not least, how worried should we be about all of this?

DOUG: Well, although regulators are concerned about the rise in bad loans, the banking watchdog said in a recent statement that the increase is quote “both normal and necessary,” end quote. According to them, the economy needs continuing credit support（信贷支持） to get back to normal in the face of what they are describing as the catastrophe of the century.

Nandini: Ok thanks Doug. Well that’s our top stories done. Now let’s find out what else has been making headlines.

DOUG: TikTok is taking big steps to stop the White House from shutting down the highly popular video-sharing app in the U.S. Bloomberg reports that TikTok and its Chinese parent, ByteDance, sued Monday in federal court to challenge an August 6 order by President Donald Trump barring U.S. residents from doing business with TikTok. The Trump administration has accused the Chinese social media app of threatening national security. Meanwhile Tiktok has denied any wrongdoing, saying Washington’s ban on the app is not only motivated by political reasons, but is also unconstitutional and violates rights to due process. The company said the U.S. president’s executive order to bar Tiktok would quote

“destroy an online community where millions of Americans have come together to express themselves, share video content, and make connections with each other” endquote.

Nandini: Chinese health authorities have been inoculating（接种疫苗） medical workers and other at-risk groups against Covid-19 for more than a month as part of an emergency access program, a senior health official has revealed, as he flagged plans to include other essential workers ahead of the winter flu season. National coronavirus vaccine task force chief Zheng Zhongwei confirmed the existence of the program for the first time in a primetime interview with state media outlet CCTV on Saturday. He said the emergency use was limited to people such as medical personnel, epidemic prevention officials and border inspection workers.

DOUG: Regulators have given more foreign firms the once-off-limits opportunity to manage Chinese people’s money by approving a joint venture（合资企业） of asset management heavyweight BlackRock and Singapore’s sovereign wealth fund（主权基金）.

The approval is just the latest step that China has taken to open up its financial sector to foreign firms by offering them a chance to get their hands on the country’s multi-trillion-dollar wealth management industry（财富管理行业）. As of the end of May, China had just over 90 trillion yuan or $13 trillion outstanding wealth management products.

Nandini: And that completes today’s Caixin China Biz Roundup. Be sure to download the next edition for more essential news. And please don’t forget to rate us on your podcast app or better yet write us a review so other people can find us.

Goodbye and Zaijian.

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