Category: Finance

LinkedIn Comes to China

LinkedIn just launched their Chinese version, which will have to contend with strict censorship issues and other complications. China actually has the world’s largest online community with over 618 million users. Users, however, can’t use Facebook or Twitter, and they are confronted with a Great Firewall that blocks online forums or sensitive materials.

The new LinkedIn allows users to post public comments, but no group discussions are allowed. As chief executive Jeff Weiner said, “As a condition for operating in the country, the government of China imposes censorship requirements on internet platforms.” He promised that “government restrictions on content will be implemented only when and to the extent required” and that it “will be transparent about how it conducts business in China”.

He continued, “LinkedIn strongly supports freedom of expression and fundamentally disagrees with government censorship. At the same time, we also believe that LinkedIn’s absence in China would deny Chinese professionals a means to connect with others on our global platform.”

The English-language version of LinkedIn has already been available in China and has four million users. Now, the Chinese version hopes to attract more than 140 million Chinese users.

According to the China Internet Network Information Center, China’s online population (defined as anyone who has used the internet at least once in the past six months) is the largest in the entire world. Time will tell how LinkedIn does in this location.

David Cameron Set for Trip to China Next Week

All eyes will be on China next week as David Cameron prepares for his visit. He will be leading the UK’s largest trade delegation yet as he goes for a two day visit. While there, he will attend dinners with President Xi Jinping and Premier Li Keqiang.

London’s main goal is to reopen routes into Beijing after they were closed when Mr. Cameron met with the Dalai Lama, an event that infuriated China. He is now hoping the trip will “turn the page” after that fight.

Mr. Cameron has focused on the importance of the UK-China trade relationship for years, first promising in 2010 that he would double British trade to China by 2015 to £62bn.

Trying to enhance the trading partnership, Mr. Cameron will take 120 businesspeople with him next week. The delegation will include: Ralf Speth (chief executive of Jaguar Land Rover); George Weston (chief executive of Associated British Foods); Jorma Ollila (chairman of Royal Dutch Shell); Xavier Rolet (London Stock Exchange chief executive) and others.

As Stephen Crisp, the JLR global director of government affairs said, “It shows the UK’s long-term commitment to the country. But also the prime minister will be followed by Chinese politicians wherever he goes, and that will make sure they notice us.”

Singles Day Festival Brings In Millions

This week, China saw its biggest online shopping spree of the year as part of the “Singles Day” festival. This interesting tradition was started by Chinese college students in the 1990s as a Valentine’s Day of sorts for people who aren’t in a relationship.

They picked November 11 because it was “11.11” which showed four singles. The idea of the day is for unattached people to treat each other to dinner or to give gifts to try to court people that they are interested in dating and to end their single status.

Lucky for online stores – the event has turned into the biggest day of the year for online shopping and a busy day for delivery services. China’s delivery companies actually had 800,000 employees working on November 11th, including 65,000 who were hired temporarily just to help out that day.

China actually has the world’s biggest population of online shoppers; as there are 193 million shoppers in contrast to the 170 million in the US. The largest e-commerce platform in China, Tmall.com kicked off their Singles Day promotions at midnight on Monday and had 116 million RMB ((£11million) in sales. The total revenue online for the day reached 35 billion RMB (around £3.5 billion). Last year the sales total was 19.1 billion RMB (about £2 billion).

Car Sales on the Rise in China

In an interesting article recently about the global car industry, Yahoo Finance pointed out that China is showing itself to be a major growth spot for the global auto industry. As Carlos da Silva, an analyst at IHS Automotive explained, “For many years it’s been the Bric nations (Brazil, Russia, India and China) which have accounted for the growth of global sales, taking over from the more mature markets.”

Sales for cars in these BRIC countries are not all growing at the same rate. Russia may see car sales fall by 7% this year, according to IHS Automotive. In India, car sales are also expected to decline. Brazil expects their sales to remain stable at about 3.6 million cars, as IHS reports. But China appears to be the hot spot in this equation with sales continuing to rise if analysts are correct.

PwC is predicting that the sale of new cars in China may double from 2013-19. As Julien Marcilly, head of country risk with credit insurer Coface explained, Chinese houses have very little debt and the minimum wage has increased by about 20% in the country.

 

 

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New Fund: China Life AMP Asset Management Company

China’s biggest insurer, China Life, and AMP Capital will be establishing a new funds management company in China soon. The new company will be called China Life AMP Asset Management Company and AMP will have a 15% stake in the new company. The balance will be held by the China Life Asset Management Company.

As AMP said in a recent statement, “Total assets under management in China’s mutual fund industry is expected to reach $0.8 trillion in 2013 growing at 15 per cent per annum to reach almost $1.5 trillion in 2017.”

The deal is going to be China Life’s first joint venture in mainland China. Before being finalized, the joint venture will go through regulatory approval by the China Securities Regulatory Commission.

As Mr. Dunn said, “The funds management joint venture represents the commercialisation of our memorandum of understanding with China Life and is the ideal balance of our mutual strengths and capabilities.”

China Building Beyond Demand

The dream of China and the reality appear to be clashing, as China’s urbanization and construction frenzy are coming up against the reality of trying to attract businesses and residents.

The urbanization plans for China are predicted to see 250 million people move from rural areas to cities in the next 20 years, according to Premier Li Keqiang. As Li said in March in his first news conference as the premier, “Urbanization will not only drive tremendous consumption and investment demand, and create employment opportunities, but directly affect the well-being of the people.”

But the reality appears to be different from the dream. Tieling, a small city in northeastern China, for instance, has a ghost town of building waiting for someone to come and live there. Businesses in the area that were supposed to create local employment haven’t happened, and people have not moved as expected.

As Bo Yuquan, a middle-aged owner of one of the only stores in the area said, “Where are the people? There’s no one here. I’ll be out of business soon. My staff and I are discussing moving to Beijing to find work.”

Efforts from the government to draw people to Tieling have failed so far. And yet, Tieling has continued to build with plans by the municipal government to spend another $1.3 billion on projects for the new city. The saying goes, “If you build it, they will come. But in this situation, time will tell if anyone will actually do so.

China Predicts Slow Economic Growth

Four months ago, China set an official target of 7.5% for the country’s economic growth. Now, the finance minister has just announced that he expects the economy to grow 7% this year. Certainly, this is raising the ire of many and putting China’s financial stability into question.

Not only was the official announcement of the intended 7.5% growth mad during a Communist Party parliamentary meeting in March, but the target goal is usually offered with a conservative number so that the country may actually exceed that prediction.

China’s economy saw a 7.8% growth in 2012, which was actually the worst they had done in 14 years. The first quarter growth for this year has slowed to 7.7%.

As Lou Jiwei recently told reporters during a strategic and economic dialogue between China and the US last week, “Our expected GDP growth rate this year is seven per cent. Of course, it won’t be a big problem for us if we achieve growth of seven per cent or 6.5 per cent.”

Tensions Arise around the ASEAN Plus Three Meeting

The ASEAN Plus Three meeting in India included quite a few no-shows. Both China and South Korea skipped the meeting of finance chiefs from the Association of Southeast Asian Nations (plus Japan, China and South Korea).

The meeting was supposed to be an important opportunity for the finance chiefs of these countries to meet as they prepared for the Asian Development Bank’s annual meeting that began on Saturday.

The South Korean finance ministry official said that the chief wasn’t there because he was “busy” with internal issues in his country and “disappointed” that he couldn’t be there. The Chinese finance minister couldn’t be there because of “a domestic meeting.”

A former senior Japanese finance official in India said the Chinese and South Korean finance chiefs’ absence at ASEAN Plus Three was “apparently because of a deterioration” in Japanese-Chinese and Japanese-South Korean relations.

Chinese Immigration to Canada on the Rise

Apparently many wealthy Chinese have their eye on immigrating to Canada, according to BMO Financial Group. The number of high-net-worth people in China who have investable assets greater than $1.5 million reached 960,000 in 2011. 60% are interesting, or have already made an application to immigrate, as Gina Li at BMO Financial Group explained.

Li said that approximately 30,000 immigrants come to Canada each year from China. As Li explained, “A lot of high-net-worth Chinese are looking at diversifying investment, investing in Canada, finding homes for children while studying here and looking for global asset allocation.”

Chinese business people who relocate find many growing pains along the way. They aren’t used to how things work in China, and this becomes a process for them. As Ray Tseng, who helps immigrants with advice, training and mentoring explains, “In China, it’s different because there are so many people there, once you open the door, business just happens. Some of them may not even know how to calculate the break-even point.”

Changes in the Chinese Gaming Industry

In a recent article about the Chinese game industry, this author discussed how the companies have focused on simple mobile games and browser based computer games. Internationally, the game industry is more diverse.

As the article explains, “This has been a potential concern for investors in Chinese games companies, both in terms of international growth potential and a concern that Chinese gamers might follow a similar trend away from these simpler games. We are now seeing some signs that Chinese games companies are not just aware of this potential, but are indeed looking to develop in that direction.”

The article explains why the changes in the Chinese game industry have investors interested. As he said, “It implies potential international upside potential, and perhaps expansion plans in the not too distant future. While this may sound all well and good, investors need to take a cold hard look at whether or not they think the company’s finances can handle such a strain. Going international, while to my mind almost a necessity in the long term, is also unlikely to be free or easy. It will take some tinkering to get it right as well, as we have seen with many other Chinese international expansion efforts. Look for some stability with a decent war chest and promising free cash flow to help stave off panic responses should the first efforts fail.”