Major structural change is under way in China’s passenger car market. New car sales grew just 1.2 per cent in May, as the country develops a used car market for the first time in its history. Buyers in the world’s largest auto market now have much more choice when it comes to buying a car, and are no longer forced to buy a new car.
By Spencer Lake, HSBC
Chinese companies have been stepping up their global investment spree in the past 12 months. Mergers and acquisitions by private Chinese investors are becoming the key drivers of the country’s outbound direct investment.
In what has been called the ‘Third Wave’ of China outbound direct investment (ODI), the focus of investment has been on companies in the developed economies in high-tech and services. Previous ‘waves’ have focused on supporting developing economies and investing in commodities and extraction industries. Read more
Last year, Bangladesh Prime Minister Sheikh Hasina announced that her vision for the Bangladesh ready-made garment (RMG) sector was to reach $50bn in exports by 2021. It is an important and ambitious goal for a nation that has worked hard to develop a brighter economic future. With the RMG sector accounting for 81 per cent of Bangladesh’s overall exports, reaching such a milestone could help the nation substantially reduce poverty and strengthen economic outcomes for millions of people.
Transforming industries and economies requires dedication and commitment from numerous stakeholders, ranging from the government to the private sector. That’s why the Alliance for Bangladesh Worker Safety and the Accord on Fire and Building Safety in Bangladesh—two coalitions of brands that source garments from Bangladesh—have undertaken an enormous and unprecedented effort to inspect every factory from which their members source, and to ensure that safety issues are thoroughly addressed. Read more
A month ago, in the largest military parade held on Red Square since the days of Stalin, one foreign guest drew as much attention as the fearsome hardware on display. While leading the celebrations of the 70th anniversary of victory in what Russians call “the Great Patriotic War”, Vladimir Putin had by his side the congenial Chinese president, Xi Jinping.
President Putin hoped Xi’s presence would symbolise a new, multipolar world order, with Moscow and Beijing playing leading roles. Ultimately, Russian strategic thinking continues to assume, as it has since the days of the Tsars, that military and geopolitical power precede and largely determine a nation’s wealth and prestige. Read more
By Simon Currie and Stephen Begley, Norton Rose Fulbright
India is the latest in a string of markets to witness a solar energy boom. Solar power currently accounts for just over one percent of India’s total installed power capacity of 261 gigawatts (GW) and the government’s new target is to add a staggering 100 GW of solar capacity by 2022.
Traditional markets for solar, like Europe, don’t offer the same growth prospects making India one of the next big stories for the global solar industry. It has already come a long way from just under 12 megawatts (MW) of installed solar capacity at the end of 2010, to 3,743 MW as of March 2015. This has largely been achieved through federal reverse auctions, with the first tranche of the next round eagerly awaited later this year; a significant 1000MW will be up for grabs. Read more
By Lee Cashell, Asia Pacific Investment Partners
Mongolia’s economy had a bruising year in 2014 with barely a week passing without the currency hitting a new low against the US dollar and foreign investment dropping by a precipitous 74 per cent year-on-year. But last month’s announcement that the Mongolian government has broken the deadlock in negotiations with Rio Tinto for the development of the second phase of the Oyu Tolgoi copper mine signals that a new round of foreign investment will begin flowing into the country.
Saikhanbileg Chimed, the prime minister, has been building a clear case that Mongolia’s economic growth will stall without foreign investment, appearing on national television in January to hold an X-factor SMS style vote on the question of whether Mongolians want austerity or prosperity. The majority of the country’s 3m citizens texted “prosperity” which he has taken as a mandate turn the green light back on for foreign investment. Read more
India’s ecommerce market is on a rocket-like trajectory. The success of home-grown players such as Flipkart and Snapdeal has grabbed investor attention and now venture capitalists and global tech giants are flocking from China and elsewhere in the hope of finding India’s Alibaba – vital ammunition in the battle for the Indian middle class, which is set to outstrip that of the US in a matter of years. Read more
By Wesley Wu-Yi Koo and Lizhi Liu
Behind China’s impressive economic rise is the biggest human migration in history. By 2013, some 269m rural residents had become migrant workers in cities, offering cheap labour and sustaining urban growth. However, unable to register and settle their family members in the cities, these migrant workers are forced to leave behind children, spouses, and old people in the villages. This has taken a tremendous toll on the rural society.
Today, there are 61m “left-behind children” and 40m “left-behind elderly” in Chinese villages. Some 79 per cent of the left-behind children are under the care of grandparents, who are often uneducated and lack parenting resources and energy. As a result, the academic scores of 88 per cent of these children fall below what would be the passing line in cities. Read more
Noticeable progress has been made recently in Chinese companies in the areas of capital structure, management and employee incentivisation.
It is has long been said – with some justification – that aligning interests between stakeholders in China was almost impossible. Consequently the majority holder, historically the government in most instances, would dictate expansion plans based on broader economic objectives rather than narrower shareholder return motivations. Read more
China is in the early stages of a domestic M&A boom unlike any other elsewhere in the world. Deal pricing, timing, terms, financing and structure are all markedly different than in other major economies, with likely consequences, good and bad, for global corporations and buyout firms eyeing M&A transactions in China.
For these two, as well as companies wishing to find a buyer in China, the game now is to learn the new rules of China M&A and then learn to use them to one’s advantage.
Chinese companies mainly pursue M&A for the same reasons others do – to improve margins, gain efficiencies and please investors. The main difference, and it’s a striking one, is that in most cases domestic Chinese corporate buyers, especially the publicly-quoted ones who are most active now trying to do deals, have no money to buy another business. Read more
Arguably the most revealing English translation of the French verb ‘étonner’ – at least in the context of Napoleon’s famous quip about China – is ‘to astonish’. “Ici repose un géant endormi, laissez le dormir, car quand il s’éveillera, il étonnera le monde” so the Corsican is said to have noted. “Here lies a sleeping giant, let him sleep, for when he wakes, he will astonish the world.”
Some 200 years later, that giant has awoken and Napoleon was right: China is now astonishing the world. In the past three decades, it has roused itself from a slumber to a state of almost unimaginable vibrancy. The roll-call of economic trophies it now claims is daunting: largest exporter, importer, foreign exchange reserve owner, commodity consumer, luxury goods market, most car sales, most internet users, even (in purchasing power parity terms) biggest economy. Read more
A stark dichotomy has emerged between Indian economic data and the reality on the ground. In the latest example, the Reserve Bank kept interest rates unchanged at its last monetary policy review earlier this month and issued a dovish statement. Signs of an investment revival are meagre and consumption demand remains weak – in strong contrast with the GDP growth estimates of the government and the Central Bank.
Despite general optimism following the election of the Narendra Modi government last May, the pace of economic revival has been slow as both investment and consumer demand remain weak. Read more
Over many years, China has gained acclaim as the world’s manufacturing powerhouse. But today, innovation is flourishing in the world’s most populous nation, which is rapidly becoming a trendsetter with the potential to disrupt business models globally.
On a recent research trip to China, we were struck by the huge enthusiasm for locally developed smartphones and the entrepreneurial spirit sweeping the country. Indeed, the number of patents filed by Chinese residents has surged in recent years, both locally and abroad, to exceed the world’s largest developed economies. Read more
The ever ingenious Chinese financial system has developed a new kind of shadow bank – insurance companies.
China’s $586bn stimulus package in 2009 caused a flurry of lending through the country’s financial arteries. Some of this money ended up leaking out of the banks into unofficial channels, including the country’s state banks and the giant provincially-owned pseudo banks called Trust Companies. By the end of 2014, these off-balance sheet loans accounted for 18 per cent of all financing, up from less than 2 per cent a decade earlier. Read more
The increased tensions between Russia and the west, the continuing problems in the global economy and the rising threat from extremism have rightly caused concern in capitals around the world. The crisis of confidence in international relations has further weakened the abilities of all states to deal with modern challenges and threats. Viewed from Kazakhstan and Central Asia, however, these shadows over our collective hopes seem even more menacing.
Ukraine is a country with which we have deep historical and personal ties. The continuing conflict there has had a deep impact on us and the wider region. We have responded by working tirelessly to help settle the Ukrainian crisis. The Minsk agreements have created conditions for a long-term solution. Read more
As the Chinese economy posts its slowest growth in six years, major reforms to China’s state-owned enterprises are now in the final planning stages. The Xi Jinping administration has pledged to overhaul and consolidate the state-owned economy to tackle widespread inefficiency and corruption.
A wave of mega-mergers among state-owned firms has already been announced in railways, nuclear power and other industries. Consolidation may be easier politically than market reforms, but it’s not the right way forward. China’s crown jewel firms don’t need to be bigger; they need to be better. Read more
One year on since new trade mark laws took effect in China and there is little evidence to show it is becoming any easier for global brands to enforce their rights in the country. The new laws and practices were intended to make it easier to enforce trade mark rights and provide greater levels of transparency and accountability surrounding intellectual property (IP) infringement.
It’s easy to understand why an increasing number of western companies are looking to take advantage of the Chinese market as e-commerce sales have recently rocketed, outpacing the US. However, some companies are still finding it difficult to protect their brands in China. Read more
The first whispers of worry about a Chinese property bubble surfaced in late 2009. Since then, the local real estate market has quickened and slowed in line with government measures to stoke or cool the market, but has never crashed. Nonetheless, some market watchers insist that the Chinese property bubble will burst one day. Recent sector weakness has given them further ammunition, as has the near collapse of Kaisa, a mid-sized Shenzhen-based developer.
Until December 2014, Kaisa’s finances were perceived to be strong and sales were rising. Now its survival is at the mercy of lenders and rivals. Its woes started when the government halted some of its Shenzhen projects in December without giving a reason. The chairman abruptly resigned, while debts to banks and bondholders have gone unpaid and the firm is in the process of being acquired by its competitor. It has yet to reach a consensual solution with its creditors. Read more
Argentina recently announced a deal to buy nuclear reactors from China, one of which is expected to be of original design. The anticipated export of the indigenously developed Hualong One is a symbol of how far China has come in a relatively short space of time. It has been able to manipulate its expanding domestic market to make a meteoric rise in terms of technological development.
A relative latecomer to nuclear power, its first reactor was connected to the grid in 1991. Less than 25 years later, China is now aiming to become a major player in the supply of nuclear technology to the world. Read more
After China’s notable political success in registering more than 35 applicants for funding membership of the yet to be launched Asia Infrastructure Investment Bank (AIIB), some important issues remain to be addressed that will determine the long term success of the new institution.
Scope of intervention: China-centric or Asia-focused? It is no coincidence that the set-up of the bank comes at the same time Beijing is rolling out its “one road, one belt” action plan. The revival of the Silk Road is part of the charm initiative aiming at winning greater consideration from neighboring countries as much as fostering trade relationships. Read more