China investment

By Gavin Bowring, Asean Confidential

China’s two-way trade with the 10 nations of the Association of Southeast Asian Nations (Asean) has grown more than fivefold over the past decade and is on course to reach nearly $500bn this year. However, Chinese direct investment into Asean has been relatively anemic by comparison, accounting for only 7 per cent of China’s total foreign direct investment (FDI) stock.

But if Beijing gets its way, this is set to change. China plans a fivefold ramp up of its FDI in the region to a cumulative $150bn by 2020 from $30bn currently. Over the same period, it sees a doubling in bilateral trade to $1trn by 2020. The map below sets out the current trade flows and dynamics. Continue reading »

For many emerging markets, the most worrying aspect of Chinese economic statistics announced on Thursday is that they reveal a slump in the construction spree that has sucked in vast quantities of metal ores and other commodities from Latin America, Africa, Russia and parts of Asia.

But which EM economies are most vulnerable as China throws the commodity cycle out of joint? Craig Botham, emerging markets strategist at Schroders, has come up with a vulnerability ranking (see chart) that identifies the exposure of EM countries to a slowdown in net non-food commodity exports to China. Continue reading »

By Francis Bassolino of Alaris Consulting

“In a market that is so large, why can’t we win our share?” So runs the familiar question at many a multinational struggling to turn a hefty investment into China into a growing profit stream.

This year, as the Year of the Horse gets underway, such habitual grumbles are sharpened by recent incidents involving some high-profile corporate names. The corruption scandal at GSK, the UK pharmaceuticals company, a write-down of US$580m on a China acquisition by Caterpillar, the US machinery giant, and the retreat from the China market of Revlon Inc, the cosmetics company, have all served to reinforce questions over whether global managers should devote more resources to China. Continue reading »

Why did inflows of foreign direct investment to China jump by a strong 16.1 per cent to $10.8bn in January?

Such a robust performance may seem counterintuitive. The Chinese economy slowed last year. Its manufacturing competitiveness is being eroded by a welter of rising costs. Several high-profile incidents – a corruption scandal at GSK, the UK pharmaceuticals company, a $580m write-down on a China acquisition by Caterpillar, the US machinery giant, and the retreat of Revlon Inc, the cosmetics company, have all raised questions over the longevity of China’s allure.

But even so, say analysts, the country retains its attractiveness for foreign investors simply because it generates superior returns. Continue reading »

Michael PettisBy Michael Pettis

In October two Chinese academics presented research proposing that China’s National Bureau of Statistics under-reports the Chinese household consumption share of GDP, officially at 36 per cent, by ten to twelve percentage points. There have been other studies suggesting that consumption is understated in the official data (although by much lower amounts). Analysts who still doubt China’s need for significant economic reform have often claimed that consumption in China is much higher than the official data reports. These upward revisions show, they argue, that the consumption imbalance in China’s economy is not as bad as is often supposed, and so will not require a sharp slowdown in economic growth as China rebalances its economy.

There are at least three reasons to be sceptical about this argument. Continue reading »

China’s local-government infrastructure initiatives are notoriously poor revenue generators. Toll roads may be the worst offenders.

Provincial debts to fund expressways – China’s motorways, most of which require drivers to pay a toll – have surged by 37 per cent since 2010, according to China’s latest National Audit Office report in June. But just as these loans have mushroomed, they have become harder to finance. Continue reading »

By Ken Peng of Citi Private Bank

China must rebalance! Yes, everyone from President Barack Obama to your average Beijing taxi driver knows that. Around 48 per cent of China’s GDP is investment, just 36 per cent is household consumption, with government spending a bloated 13 per cent and net exports, 2 per cent. Whether through timely and painful reforms now or delayed reforms and disaster later, investment growth is expected to falter and consumption to be unable to pick up the slack.

But what if these basic assumptions are wrong? Continue reading »

By Leslie Young of the Cheung Kong Graduate School of Business

On Friday, China will release its third quarter GDP figures to wide scrutiny, given the country’s impact on the world economy. But what might be overlooked by the focus on GDP growth?

Additional insights can be found in the data for the growth of Gross National Income (GNI), which augments GDP by producer taxes and the net income paid to nationals. Continue reading »

What’s the bigger risk for emerging Asia, the US tapering its QE programme, or the fall-out from years of over-investment in China? In the World Bank’s East Asia And Pacific Economic Update, they get a chapter each in a section titled “Selected Emerging Issues”, which could be better titled “what we should be worried about”.

And the conclusion? Continue reading »

Ajith Nivard Cabraal, the Sri Lankan central bank governor, is on a mission – to China.

As the world waits for the US Federal Reserve to start “tapering” its $85bn monthly bond purchase programme – the prospect of which has hit many emerging market currencies including the Sri Lankan rupee – Cabraal is heading to China to attract more investment to the south Asian economy. Continue reading »

Is China’s recovery underway? What do all the recent numbers mean?

Beyondbrics brings you a few pointers to the batch of Chinese economic data, and what the commentators think. Continue reading »

Source: Bloomberg

OK, so it wasn’t 7 per cent – let’s leave finance minister Lou Jiwei’s comments aside for now. But it was 7.5 per cent, and although that sounds like a healthy number in the west and was expected by economists, it’s part of a downward trend.

So is there anything positive to take from the GDP numbers? Continue reading »

Better than Kowloon?

With property prices at record highs, the Hong Kong government is trying to turn mainland Chinese buyers away.

But other investment destinations are already stepping into the breach – and luring the cash-rich mainlanders away from Hong Kong. Continue reading »

When Wang Jianlin, head of China’s property conglomerate Wanda Group, confirmed a deal Wednesday to acquire the UK’s prized yacht maker Sunseeker, it was probably read by many as evidence of China Inc.’s hunger to snap up targets around the world.

But all is not well with outbound M&A by Chinese companies. The buyers may be keen but the targets are not so happy, according to a survey by MSL China, a subsidiary of Publicis, published on Wednesday.

 Continue reading »

Dalian Wanda Group, China’s largest premier commercial property and entertainment conglomerate, confirmed on Wednesday that it’s going ahead with a widely-signalled £320m deal to buy control of Sunseeker International, the British luxury yacht maker, and a £700m luxury hotel development in central London.

The £1bn combined investment highlights the ambitious Chinese developer’s commitment to international expansion and its faith in the British economy – or at least in two sub-sectors of great interest to wealthy Asians. Continue reading »