Tag: China

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.”

Apple iPhone5 Makes Quiet Entry Into China

Certainly, for anyone interested in investing in China and in understanding the Chinese financial mentality, the debut of the iPhone 5 is big news. Apple Inc.’s iPhone 5 debuted in mainland China on Friday…to very little reception.

The arrival of the iPhone 4S in January sparked a fury of interest – but this one was just the opposite. Two iron fences were actually placed in front of the Joy City Apple store this week to control the crowds, but there were not crowds in site.

As Wang Lu, a woman in her 20s said, “I was told that I had to make a reservation online first. Even if I apply right away, there is no chance I can pick up a phone today.” Apple actually created a reserve-and-pickup policy after the chaos that they experienced in January. Therefore, it’s hard to know if the quieter atmosphere was entirely due to a lack of interest or to the new processing system. Customers today have to apply online and then attend a drawing to secure a phone.

Analysts have said that, in addition to the new selling policy, the ample distribution channels and stock has resulted in a much lower-key welcome for this phone.

As one Beijing-based telecom industry insider, Xiang Ligang, said: “If customers can buy the iPhone 5 anywhere, why bother to buy one at Apple flagship stores or from scalpers?”

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.”

China’s Central Bank Adds Dramatic Amount to Banking System

For the second time in two weeks, China’s central bank added an injection of money into the country’s banking system. This spurred stock-market rallies in both Shanghai and Sydney and sent the signal that the government is trying to stimulate the economy.

The cash injection was actually the second-largest that has ever been put into the banking system. The way that this worked is that the People’s Bank of China used what is called a reverse repos, a short-term type of loan to commercial banks, to pour $42.14 billion into the market on Tuesday.

As Dariusz Kowalczyk, a senior economist at Crédit Agricole CIB, explained, “The central bank seems to be scrambling to bring money-market rates down in order to support growth. The large open-market operation shows a pro-growth policy bias and should thus be positive for market sentiment.”

Ironically, the injection came one day after the International Monetary Fund lowered its forecast for China’s economic growth for this year and for 2013. The IMF expects China’s economy to grow 7.8% this year and 8.2% next year, which is down from their estimates of 8% and 8.4%.

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 Looks to Gambling Opportunities in Matsu

China and Matsu are hoping that the offshore island group of Matsu will attract a large number of gamblers from China. As Anita Chen, a Taipei-based managing director for US-based lobbying firm Park Strategies said, “People that are looking to building casinos anywhere in Taiwan are eyeing Chinese tourists.”

The Matsu government explained that they had a turn out of 40% of eligible voters, and a vote of “yes” from 1795 voters (as compared to 1341 no). Matsu has a population of about 10,000 and is eager to attract tourists since it has been hit by a drawdown of troops in the Taiwan Strait.

It is predicted that Matsu will need three to five years to set up their gambling industry. They need to finish getting the Gambling Act approved by the Taiwan Cabinet and then need to put together a bid for an operator. It could take another three years from that point before the casino is actually built and ready for operations.

Automobile Boost in China for May

May was a very good month for automobile makers and distributors in China. Vehicle sales rose 16% in China year-on-year in May. The data from the industry showed that 1.61 million units were sold during the month of May, showing a strengthening and strong recovery for the world’s largest automobile market. While the sale of passenger vehicles had gone up 12.5% in April, they went up 22.6% in May to 1.28 billion, according to the figures from the China Association of Automobile Manufacturers.

In 2011, the auto sales in China had a dramatic downturn when the government pulled back some of its incentives and some cities slapped harder restrictions on car numbers to get rid of pollution and congestion. While auto sales had increased more than 32% in 2010, they increased by only 2.5% in 2011.

Now, a company like General Motors has a 21.3% surge in May, showing a record number of auto sales. State media has also reported that policymakers are thinking about reviving policies to subsidize the buying of smaller vehicles in rural areas. This will help to increase consumption and help with the economy.

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.

Trade Between China and North Korea Dramatically Increases

In a fascinating turn of events, North Korea is taking notes from China and starting to create megamarts like Walmart.  Pyongyang will soon have a superstore like Walmart.  The new consumer approach in North Korea is part of an official campaign that they launched three years ago to build up their economy – and to change the image of their leader Kim Jong Un.

The Kwangbok area supermarket in downtown Pyongyang is the first of these examples.  Consumers there can get everything from Minnie Mouse pajamas to popcorn to frying pans.  As shopper Pak So Jong said, "It is very good to come to this shop and buy goods which I like by feeling them and looking over them myself."

The Chinese has been introducing these cheap goods to a small niche market in Northern Korea in the country’s border regions.  Time will tell if it will take off, and if this will be a brilliant economic move for China.

Trade between China and North Korea has been booming for the last few years.  In 2010, North Korea did $3.5 billion in trade with China, which was a 30% increase from the year before. That figure increased to $5.1 billion in the first 11 months of 2011, a 70% increase from 2010.