China

Emerging Asia is set to be the world’s fastest-growing region again in 2015, skirting the contagion from Russia’s crisis and riding the fall-out from weak commodity prices, according to Fitch, the credit rating agency. Nevertheless, structural frailties stalk seven out of 10 countries in the region, with surging debt levels a particular concern, the agency said.

The region, excluding China, is expected to expand by 5.9 per cent in 2015 and 6.1 per cent in 2016 – compared to an average for global emerging markets of 4.1 per cent and 4.5 per cent respectively, Fitch said in a report. These forecasts compare with the International Monetary Fund’s (IMF) estimates that developing economies would this year grow at 4.3 per cent, accelerating to 4.7 per cent in 2016. Read more

Economic slowdowns in Macau and China have driven headlines recently, but a new report by the Brookings Institute ranks Macau as the top economically performing metropolitan area in the world for 2014, followed by four Chinese cities in the top 10 and 11 in the top 20.

Macau’s casino industry took a hit over the second half of 2014, due mainly to a Chinese crackdown on corruption and graft that has reduced the number of VIP high-rollers travelling to Macau from the mainland. In December, gambling revenues hit their lowest point since 2011, and for the whole year, the industry recorded its first ever year-on-year decline – much to the dismay of casino and junket operators. Read more

By Robert Moffatt, Neuberger Berman

Throughout much of the world, auto market prospects appear sluggish. In the US, auto sales are moving back to normalised replacement demand levels, implying slowing growth. In Europe, sales are being held back by a choppy economic recovery. China, in our view, presents a different story. Despite near-term concerns about the country’s slowing GDP growth and slipping consumer confidence, we are bullish on the long-term growth prospects of Chinese autos.

The Chinese auto market went through a rapid growth spurt from 2005-2010, growing nearly six-fold in six years, from 2.5m units in 2004 to 13.75m units in 2010. This unprecedented 35 per cent compounded annual growth rate has since slowed to roughly 9 per cent, but with nearly 18m cars sold in 2013, China has displaced both the U.S. and Western Europe as the world’s largest auto market (see chart below). Read more

The press conference to announce China’s annual economic statistics is always an Orwellian affair in which bad news is given a positive spin and good news is entirely thanks to the leadership of the Communist Party Central Committee.

This year’s event, announcing the slowest growth rate in 24 years, included a less subtle pitch to the media than usual. In the midst of a soliloquy on the improving quality of growth and the ongoing rebalancing of the economy, China’s genial statistician-in-chief Ma Jiantang paused to take a breath and address the assembled journalists directly. Read more

By Derek Scissors, American Enterprise Institute

“In 2014, faced with the complicated and volatile international environment and the heavy tasks to maintain the domestic development, reform and stability, the Central Party Committee . . . seized the momentum of development, fully deepened the reform and opening up, focused on the innovation of macro control, tapped into the vitality of the market and fostered the driving force of innovation.”

That is the start to today’s National Bureau of Statistics’ (NBS) press release on the economy, a reminder that Chinese statistics are published at the pleasure of the Communist Party. Read more

By Frederic Neumann, HSBC

Things in China look a bit soggy. True, growth a touch above 7 per cent is nothing to sneer at. But it’s down sharply from days past. And as the Mainland matures, those double-digit growth rates seem even less likely to return. Where, then, to look for the next story of hyper-charged growth?

Plenty of promising places around: Sri Lanka will probably grow faster than China this year, and so could the Philippines, Vietnam and Bangladesh at some point. But, from a global perspective, these will hardly make a dent; certainly, commodity markets will not get terribly excited about accelerating demand from these markets. Read more

By Stuart Rae and John Lin, AllianceBernstein

Despite a slow start following its launch in November, the Shanghai-Hong Kong Stock Connect share trading scheme has significantly increased foreign access to China equities and created new investment opportunities. Two sub-sectors are particularly noteworthy for global investors; the food, beverage and tobacco segment and the household durables segment.

A key trend to watch in 2015 will be the likely increasing usage of Shanghai-Hong Kong Stock Connect. This important capital market reform was launched by the Chinese government last November to help increase the inflow of foreign capital to the Shanghai equity market, while also facilitating greater participation by mainland investors in Hong Kong-listed equities. Read more

By Ilan Goldfajn of Itaú-Unibanco

China’s growth model has long been driven by exports and investment, favouring commodity exporters like Brazil. But as its future growth will be fueled by increases in household spending, this shift will have a negative impact on the prices of international commodities, including those exported by Brazil.

However, the outlook for a weaker Brazilian real and a stronger renminbi implies a reduction of wage differentials, which could be favourable for Brazilian manufacturers. This creates growth opportunities for other segments of the Brazilian economy, especially if Brazil resumes its productivity gains, narrowing the current cost differential between the two countries. Read more

Guo Guangchang, an entrepreneur who claims inspiration from China’s oldest sages - as well as from the “sage of Omaha”, Warren Buffett – has topped an inaugural ranking of the wealthiest Chinese investors with a personal fortune estimated at $4.5bn.

Guo (above), 48, typifies the eclectic acquisitiveness of China’s emerging cohort of investors. His company, Fosun International, this month won the longest takeover battle in French history by beating Italian investor Andrea Bonomi to take control of Club Méditerranée, the vacation organiser, after a 16-month wrestling match. Read more

China’s “big four” state banks are losing share in the country’s fast-growing retail banking market as customers embrace a more sophisticated array of products and swell a burgeoning fashion for digital banking, according to a survey of savers conducted by McKinsey, the consultancy.

The main beneficiary from the slide of the “big four” – the Agricultural Bank of China, the Industrial and Commercial Bank of China, the Bank of China and the China Construction Bank – have been the joint-stock commercial banks, which include institutions such as China Merchants Bank, China Everbright Bank and CITIC Bank. Read more

By Candy Ho, HSBC

For the renminbi to go truly global it needs more than just cross-border trade flows. China needs to make giant strides in the opening of its domestic capital markets to allow renminbi to flow more freely between China and the rest of the world. This will speed up the renminbi’s emergence as an investment currency and bring the ultimate convergence of onshore and offshore markets closer.

The renminbi is already convertible under the current account and the offshore market is showing strong organic growth. At the end of November last year, offshore renminbi deposits exceeded Rmb1.85tn, up from Rmb1.35tn at the end of 2013 and Rmb315m at the end of 2011. We are optimistic that these flows will continue to accelerate as the proportion of China’s total trade settled in renminbi increases. Read more

By Li Hejun, China New Energy Chamber of Commerce and Hanergy Holding Group

Almost 200 governments met in Peru this month to hammer out a first draft of a global deal to cut emissions, ahead of a new round of climate talks next year in Paris. If the world is to arrest climate change, global economies need to embrace renewable energy. Those looking for a model of how this might be done should consider a possibly surprising source: China.

It has been little noticed by the outside world, but in China a technological revolution that will result in huge gains in efficiency and new applications for renewable energy has already begun. Read more

By Gavin Bowring and Hafiz Noor Shams

Only a few hundred meters from Singapore, the sleepy fishing villages that flank the Malaysia-Singapore Second Bridge, to the west of Johor Bahru’s famous Iskandar development, feel a world away from skyscrapers and hustle.

But this is set to change. Country Garden, one of China’s largest real estate developers, has bought a huge 1,800 hectare area of land and sea, and has made progress on developing “Forest City”, a planned mega-project almost entirely built on four separate reclaimed islands.

When completed, it would be even larger than Singapore’s Sentosa Island and have a skyline reminiscent of Dubai or Shanghai’s Pudong district (see photo). Read more

In the pale sunlight of an unseasonably warm December day, Chinese Premier Li Keqiang and Serbian Prime Minister Aleksandar Vucic on Thursday cut the ribbon to open the Mihailo Pupin Bridge, spanning the Danube in west Belgrade.

Logistically, the $170m, 1.5km bridge, built by state-owned China Road and Bridge Corporation, is intended to ease traffic in and around the Serbian capital. But Li’s visit to Belgrade has a considerably greater significance – the latest steps in China’s efforts to use the Balkans as a bridge to Europe. Read more

By Aleksandar Vucic, Prime Minister of the Republic of Serbia

Serbia recently began its accession talks with the EU and is firmly dedicated to its European path. This is a blessing to a country like Serbia, since its geographic position places us at a key strategic juncture between Europe and the Orient – and this role is becoming ever more prominent.

The first character in the Chinese words for Serbia and Serbian is pronounced sai. It translates as ‘place of strategic importance’. As Chinese characters so often do, it offers a remarkably concise and meaningful description of Serbia’s relationship with China and the world more broadly. Read more

By Jukka Pihlman of Standard Chartered Bank

The Chinese currency’s path to internationalisation has been stellar so far but something may happen next year that could propel the renminbi (RMB) into the currency stratosphere.

The IMF’s Special Drawing Rights (SDR) – the IMF’s ‘virtual currency’ based on a basket of other currencies reviewed every five years – rarely warrant much excitement. But if the RMB gets included in 2015, alongside the dollar, euro, pound and yen, it could boost the Chinese currency’s fortunes overnight. Read more

By Joseph Dobbs, European Leadership Network

Russian aggression towards Ukraine this past year has seen Vladimir Putin, the Russian president, lambasted by Western leaders. China has desisted from such criticism and instead signed two major gas deals worth hundreds of billions of dollars, co-operated in establishing a new development bank, and conducted joint military exercises. For some, Russia and China’s co-operation demonstrates their potential to challenge the global order. But in reality Russia’s pivot east faces too many hurdles to represent a viable alternative to working with the West.

Russia and China have much in common. Both states are increasingly nationalistic and share a common perceived threat of Western containment. In Russia’s case this threat comes primarily from the potential expansion of the North Atlantic Treaty Organisation (Nato). China’s perception of US containment strategies derives mainly from the American military presence in East Asia. Leaders in Moscow and Beijing have both watched with unease as the West supported the Arab Spring and the so-called “colour revolutions” that rocked the likes of Georgia, Ukraine and Kyrgyzstan. Read more

By Andy Rothman, Matthews Asia

After two decades of 10 per cent GDP growth, followed by average growth of over 8 per cent, conventional wisdom is that China is on the verge of collapse. But that wisdom is based largely on many misunderstandings.

Let’s start with the consensus that China’s residential property market is about to replicate the U.S. housing crisis. But China has avoided most of the U.S. traps. For example, homeowner leverage is far lower in China than it was in the U.S. during the run-up to the crisis. By 2006, the National Association of Realtors reported that the median cash down payment for first-time homebuyers in the U.S. was only 2 per cent of the purchase price. In China, the minimum down payment is 30 per cent. Read more

Shares on the Shanghai stock exchange have climbed 22 per cent in the past month. fastFT’s Naomi Rovnick explains to Jonathan Wheatley, deputy emerging markets editor, how this is being driven by falling property prices and lower interest rates.

When the IMF announced this year that China’s economy had overtaken the US economy at purchasing power parity, there was some skepticism about the usefulness of PPP calculations and widespread amazement about the speed at which China had made this transformation.

Both themes carry over in a note on Friday from HSBC, which examines the data more closely to conclude that, even after switching variables, the size and importance of the Chinese economy cannot be denied. Read more