Category: Finance

China Everbright Investing in Israeli Technology

China Everbright is planning to initiate $100 million to $200 million of investment activity in Israel’s technology sector. The company CEO Shuang Chen was in Israel last week where he met with the head of the National Economic Council, Eugene Kandel and with Sharon Kedmi, the director general of the Industry, Trade and Labor Ministry. He met, as well, with 25 Israeli technology companies.

Chen said that his company has almost signed his initial investment deals with Israeli companies. He is hoping to encourage joint ventures between the tech sectors for Israel and China. As Chen said, “Most of the Chinese investments not in government bonds are in financial institutions in Hong Kong or in natural resources.”

He continued, “We need to broaden our active collaborations with Israeli companies. We want to ease the way for companies and investors in China to look abroad and not fear investing. Chinese industry needs to adapt to today’s conditions and incorporate more technology. On the other hand Israeli companies can benefit from the distribution channels of Chinese companies to reach immense markets. This requires cooperation as early as the development stage: Complete buyouts aren’t enough.”

He explained that they hope to invest…”in companies in the fields of medicine, agriculture, and clean tech that have reached an advanced stage, companies with a product and sales but still looking for rapid growth.”

China Everbright Ltd. is listed on the Hong Kong Stock Exchange and has $10 billion under its management.

China’s Wind Market Keeps Winning

According to recent figures compiled by Bloomberg New Energy Finance, China was the world largest wind market in 2012. They installed 15.9W of onshore turbines, which is more than a third of all new capacity throughout the world. 2012 was actually the fourth successive year that China led in this field, overtaking the US efforts in 2009.

Wind energy is now China’s third-largest energy source, only behind coal and hydropower. In 2012, China actually showed an 18% decline in annual installations from their record in 2011 of 19.3W. Many projects were delayed because of grid connection issues. Interestingly, new financial investments in wind in China fell in 2012 as well, to $27.2b, according to the Bloomberg New Energy Finance data. However, with the falling cost of wind energy, this means that the same dollar amount of investment will finance 10% more megawatts than it did during 2011.

When looking at the wind turbine suppliers in China, it is interesting to note that all of their leading suppliers were homegrown. These included Goldwind, Guodian United Power and Sinovel. As China wind analyst at Bloomberg New Energy Finance Demi Zhu said,

“2012 was a good year for the Chinese wind industry, considering how tough the environment was. The industry faced many problems including a reluctance by the grid operator to buy all the intermittent electricity produced by wind farms, plus stricter permitting requirements, unpaid subsidies and vigorous government efforts to cool down the industry’s rate of expansion.”

Investing in China’s Growth

There is declining economic growth at the moment in China – but many investors in the know say that this isn’t a reason to worry. Why not?

  1. Chinese economic growth might be falling, but it still exceeds 7% annually. They have the largest foreign reserves and are the biggest exporter in the world.
  2. China actually has the world’s largest economy in terms of purchasing power, according to Arvind Subramanian.
  3. Many Chinese stocks are selling now at amazing valuations. These include China Mobile, PetroChina and others.

As Jonathan Yates of The Motley Fool explained, “It’s impossible to time the market. But it’s never a bad time to buy stocks at attractive prices with appealing dividends, particularly from a country with the expanding economic power of China.

With the world’s largest population, foreign reserves and savings rate, China has a great future. For you to have a great future, the most rewarding investing approach is to pick the best companies from China and around the world, then stick with them for the long term.”

International Use of Yuan Surging

The global use of the yuan has surged, according to a report by SWIFT, the communication platform among international banks. The People’s Bank of China estimates that overseas importers will be able to save 2-3% of their invoice bills if they pay in yuan.

Trade with the yuan accounted for approximately 10% of China’s total foreign trade in July. Patrick de Courcy, head of markets, Asia-Pacific, for SWIFT said that, “The existing arrangement for offshore renminbi clearing has served the industry well, to date. In the medium to long term, however, it is important that we have an enhanced platform.”

At the moment, according to the report, there are still obstacles for European companies interested in using the yuan. The obstacles include a show payment process and difficulties with getting approval for payments from authorities, according to a recent survey by the Deutsche Bank.

The Peterson Institute for International Economics has shown that a cross-border trade in yuan is going to triple to $1.03 trillion in three years. The report concurred with other sources that the renminbi has been moving closer to becoming a global reserve currency. There are only three economies that follow the US dollar more closely than they do the yuan – Hong Kong, Vietnam and Mongolia.

Chinese Premier Wen Jiabao Shows Optimism for 2012

As reported this week on Reuters, China is on track to meet its target economic goals for this year. Speaking at a meeting of the World Economic Forum held in Tianjin this week, Premier Wen Jiabao said “China’s economic development trend is good, economic growth still remains within the target range set at the beginning of the year, and the economy is stabilizing.”

He mentioned that, if needed, the central government could tap into a special stabilization fund that has 100 billion yuan left in it. China set a 7.5% target for their economic growth in 2012 and they are hoping to reach it. Some are skeptical that they will be able to, however, as they fear that the global slowdown is slowing the economy across the country.

China’s factories are actually running at their slowest rate of expansion since May 2009.

Wen is entirely optimistic, however, saying that all initiatives that the government has undertaken this year were within their budget and that Beijing has a fiscal surplus of about 1 trillion yuan so far this year.

Chinese-US Investment Heats Up

2012 Marks Record-Breaking Year

China has been making some serious investments in America over the last year.  This is not only great news for the eastern region, but also positive for the western superpower as it seeks to turn its financial troubles into a distant memory, and make strategic plans for future growth over the next five to ten years.  In addition, China’s already attractive investment growth figures are expected to advance even further, possibly breaking the record set two years ago of $5.7bn.  Indeed, according to research undertaken by the Rhodium Group, China’s Foreign Direct Investment (FDI) into America could total $8 billion+ this year, which is incredible given that in the past it has nowhere near reached this figure.

This news shouldn’t be all that surprising though. Given that Chinese businesses have been encountering substantial growth over the last few decades, the region’s market should be able to offer America various investment opportunities, benefitting both countries. 

Benefits to East and West?

With these additional investments, it is hoped that China will benefit by gaining easier access to America’s markets, along with lower costs. Meanwhile America will gain additional access to top level technology and natural resources since China’s main investment industries are public infrastructure and high-end manufacturing.  For America’s re-industrialization plans, it couldn’t be a more suitable match.

So at first glance, it looks like everyone is a winner. But, on deeper analysis, there are questions.  It is clear that China benefits, substantially boosting its economy.  But vis-à-vis perceptions as economic superpowers, the fact that China is making such headlines is indicative that while it is developing well, America is not.  If an American businessman makes an investment in China, it’s no longer viewed as newsworthy like it was a decade ago; now everyone realizes that indeed, China is the place to make investments, which puts America’s vantage point somewhat lower on the totem pole.  This was particularly apparent when Dalian Wanda from China bought AMC – the American movie chain – for $2.6bn.

There is even more good news for China back home.  More jobs will be created for the Chinese and additional business opportunities will develop for its companies.  As the country continues to develop, it will look for increased possibilities of making foreign investments.  In the past, this has been somewhat tricky at times, with various non-business blockages, like in 2005 when China National Offshore Oil Corporation was unable to purchase Unocal.  So politicians and lawmakers need to be in sync with what is ultimately best for all countries concerned, perhaps putting egos aside.

Indeed, all these issues have – and will continue to – hamper FDI.  For example, in 2001, a mere 0.7 percent of FDI into America came from America, and China’s FDI in America accounted for a mere 2.6 percent of its total Outbound Direct Investment (ODI).  Further, when looking at China’s investments into Europe, it was more than three times that of what it invested into America. 

Given America’s already weakened and fluctuating fiscal situation, it would seem that the superpower would be doing everything possible to encourage Chinese investment, not put up blocks.  But at the end of the day, when politics plays a part, it is tough for economists to rationalize with policymakers, irrespective of how beneficial doing so will be for everyone.

China Selects Rural Area for Economic Pilot Program

In a fascinating and much-anticipated move, China has finally selected a province to begin a pilot project for financial reforms in the rural economy. Lishui in coastal Zhejiang will be the focus for the pilot program intended to help bridge the gap between the villages and the cities in terms of wealth. The People’s Bank of China (PBOC) has published guidelines for the pilot program with instructions to help the city of Lishui to build a financial infrastructure.

As the central bank said in a published statement on Thursday, "Through financial reforms and innovations, our goal is to set up a multi-layer, low-cost, wide-coverage modern rural financial service system in the pilot area."

China’s economy has a great deal of imbalance due to the financial differences in the urban and rural areas. The goal of the program is to help to create more economic stability by distributing the wealth more evenly and by helping those in rural populations to gain a better economic footing.

Trends in Asia Investing Today: A Glimpse at Oasis Investment Limited

Although some sources claim that Asian hedge funds have been struggling over the past year or so, there is much evidence to show this not the case. For instance, during the last year somewhere between 30 and 40 new funds were launched in Asia, including a significant number of high profile funds in Hong Kong.

Oasis Investments Limited, CICC Asset Management, and Azentus were among those more news-worthy funds which were launched last year, revealing the fact that hedge funds are still a popular investment vehicle for many investors looking for opportunities in the Asian market.

It is interesting to examine more closely the launching of the Oasis Investments Limited fund to see just how exciting the Asian market still is for investors. The Oasis Investments Master Fund II is a multi-strategy hedge fund that opened up to external investors at the end of the summer of 2011, aiming for total assets under management of $1 billion before closing the door to new money. Since the fund is a continuation of the strategies which were utilized during the 14 months the fund was operating internally with its own capital it is not surprising that much excitement was stirred when the fund began to seek outside investors hoping to cash in on something even close to the 100 percent annualized rate for its internal investors that the Oasis Investments Limited fund had returned during the past 14 months.

New Introduction to the Chinese Finance Market

 

China may be launching an exciting new plan for the finance market – junk-bonds.  The China Securities Regulatory Commission (CSRC) has been in meetings with executives from the various brokerage houses and discussed having a market for high-yield bonds.

Zhou Ruanfan, a senior vice president from the Pengyuan Credit Rating Co. Ltd. Was quoted by the China Business News as saying that CSRC has already drafted rules for the bonds. These bonds would offer higher yields and more risk than the typical investment-grade corporate bonds that are already offered.

Those in the know agree that a high-yield bond market will help to support China’s economic growth by offering financing to smaller firms, as Yin Jianfegn explained.  As Yin said,

"Rating agencies will gain, underwriters will gain, companies will gain, and investors may gain as well.”

However, Yin warned that the junk-bond market won’t transform the financial market overnight.  As Yin said, "It would be unrealistic to expect the junk-bond market to make a fundamental change in China's bond market structure.”

 

New Year Spending Up With Year of the Dragon

China’s week-long Lunar New Year is always good for the financial sector – and this year was no exception.  The retail sector saw a 16.2% surge year on year to 470 billion yuan ($67.87 billion) during the New Year holiday recently. Consumers were seen to enjoy purchases on food, wine and clothes.

The commerce minister reported that sales on clothes was 18.7%, jewelry rose 16.4% and food rose 16.2%, according to a statement that was posted on the ministry website on Saturday.

The peak travel period, from January 8th, 2012 to February 16th was also supposed to be very good for business.  Chinese people typically travel to be with family and friends during the holiday period. Trips on trains, planes and boats were expected to reach 3.2 billion during the height of the travel period, creating a 9.1% increase from last year.