Germany Goes to Chinatown?

Well, not exactly. But there will be some mega-German investments in China. BMW is currently planning to advance development of its work in China with “investments to increase manufacturing capacity.” According to the company’s board of management chair, Norbert Reithofer, the Chinese really like the BMW vehicles and “anticipate” more growth for the company for the future.

Mega Monies Investments

Hence the company in Germany is combining its efforts with their “joint venture partner Brilliance” in an effort to further develop the investment monies it announced before which was already significant at EU 560m. This will be taking place in Shenyang which is where their Chinese facility is. Now, the figure will be increased to EU 1bn.

This extra money will be split between BMW and Brilliance and be utilized for the construction of paint shop, press shop and to advance the Tiexi plant’s infrastructure in anticipation of greater production capacities hoped for the future.

German-Chinese Manufacturing Relations

Germany has had a good relationship with China vis-a-vis investments for a while now. For the last six years, there has been production in China of both the BMW 3 and 5 Series. Around a year and a half ago, BMW Germany said it was planning on constructing a second production plant in China “with the BMW X1 slated to begin production there in 2012.” Further, this renders China as BMW’s “third-largest market worldwide, with 167,116 vehicles sold in China during the last financial year.” The plan is that there will be an expansion of over 100,000 vehicles per annum at the first facility (Da Dong) and then at the second one, 200,000.

Awesome Asian Achievements? Coming Soon

Asian Job Creation Scheme

The economic climate and job potential in Asia is about to get a kick-start. A group of economic development officials led by Gov. Bob McDonnell just set out on an “11-day job creation and economic development marketing mission,” to China, Japan and South Korea at an estimated cost of $278,000. This scheme will be financed by taxpayers. He is being joined by Jim Cheng, Secretary of Commerce and Trade, Todd Haymore, Secretary of Agriculture and those connected with Virginia.

The group is Virginia Economic Development Partnership which will – through the efforts – be able to try and develop relations with various companies and potentially acquiesce new clients for their projects as their will be a promotion of various investment/business opportunities hopefully also resulting in “job creation initiatives throughout the Commonwealth.”

Project Gets First Lady Backing

Not only is First Lady Maureen McDonnell supportive of this great project, she is showing it by being part of the mission. McDonnell will be traveling to China and South Korea “focusing her efforts on promoting tourism and the Virginia wine industry.” Her husband believes they have much to offer, offering “a great tax, regulatory and litigation environment,” amongst other incentives.

There will be meetings with CEO’s and business executives from around the world who will be told about the benefits of investing in Virginia. It is essential that jobs are created for “our citizens” who need them he said and thus the company “will not sit by and watch as the jobs….are awarded to other states and countries that choose to be more proactive and visible.”

Worldwide Job Creation Competition

It seems that right now there is a lot of competition to try and get more jobs in the private sector area that is set to “power and define the 21st century economy.” McDonnell wants Virginia to “win that competition,” which will lead to extra “jobs and opportunities” for the citizens to ensure a “better and stronger Commonwealth in the years ahead.”

Escalating Chinese Exports

In terms of the export markets, things are going well for China now. In 2000, china ranked number 14 but now it holds the number 2 position. This is why it is now a great environment to receive McDonnell and his mission in an attempt to “promote Virginia’s location advantages to approximately key 100 business executives.”

There is a great chance that this mission will be successful since McDonnell has done it before when he went to Europe last year. At the time he “helped close a lucrative economic development deal that led to the company investing $28.3 million to expand its O’Sullivan Films operation in Winchester.” Over 150 new jobs were created there following this.

So let’s hope McDonnell does it again and Asia’s job market will really benefit too.

Global Financial System Reform?

BRIC Leaders Meeting

BRIC nation leaders (Brazil, Russia, India and China) are meeting up in China for a one day conference. BRIC is actually a bit of an inaccurate description now (it should really be changed to BRICS) since South Africa recently joined. As a unit they have both economic and political influence today, and also form part of the G20. The topic to be addressed will be reforming the global financial system since the nations comprising the BRIC make up 40 percent of the world’s population and nearly a fifth of its growth. Given these statistics, the BRICS feels they deserve a “greater say in global affairs.” While BRICS influence has increased since the start of the global financial crisis, there is still much more to be done.

BRICS Status

The BRICS will be discussing rules regarding international trade but there is no guarantee that it will hold much weight. BRICS are in favor of free trade and against protectionism, but in general don’t agree on much. Since all BRIC countries fared well vis-à-vis the 2008 economic crisis, they have already proven themselves. India has a global economic status vis-à-vis being a service provider and engages in the most trade with China although has a large trade deficit with the Chinese.

China Success

China is doing very well in the hi-tech industry, now having the status as a “mass producer of hi-tech products,” such as semi-conductors and solar panels. As well it is doing well in garment and textile industries, maintaining its reputation for being top in low-cost high value markets. At the end of the day China needs to continue to “maintain competitiveness in the global economy [through] low-cost manufacturing.” But if prices start to go up, then what will start happening is that companies will start looking elsewhere like Vietnam.

Indeed, just this last year China started constructing high-speed rail around the world, and is now “home to the world’s fastest train,” and it looks like Brazil is going to use Chinese firms to plan their high-speed rail project. But perhaps some of China’s success will come at the expense of other countries. Brazil and India are “concerned” China will “flood their markets with cheap goods.”

BRIC Cohesion?

Even though the four (now five) countries form the BRIC, it seems that in general, experts feel that the acronym alone is insufficient to give them a unified presence “on the global stage.” It is going to take much more time and a “wait-and-see” approach will have to be taken vis-à-vis G20 and other countries collaboration. While the BRIC are lessening their need to work with developed economies, globally they still have to collaborate with the “major industrialized nations.”

So the BRIC (or BRICS) do definitely have much to offer, but they need to work on compromising so that they can become a more cohesive unit and thus a force to be reckoned with vis-à-vis reforming the global financial system.

China-Mongolia Investment

It seems that the China-Mongolia border is set to be getting a coal processing project which will “better use coal imports from the Republic of Mongolia.” China’s biggest coal producer – China Shenhua Energy Co – has just set out plans at an estimated cost of 10 billion yuan for this venture. Construction has already started in the Ganqimaodu Customs Processing Park.
Ganqimaodu Customs is a major energy imports gateway between China and the Republic of Mongolia, handling a staggering 7.71 million tons of coal imports in 2010. In addition, it has been said that the Shenhua project is set to have a “coal washing ability of 6 million tons per year, coking capacity of 2.4 million tons a year and an annual capacity of producing 4.8 million tons of methanol and 30,000 tons of tar, respectively” by 2012.

Major Mongolian Economic Reform

This new investment project doesn’t stand alone vis-à-vis economic reform in the Republic of Mongolia. Economically, the region is set to undertake significant change over the next ten years, especially vis-à-vis the mining field with its huge reserves and potential for a “mining mania” and Mongolia’s reaction to it all. The recent Mongolia Economic Reform focused on how best to cope with this transition. What remains to be seen is how the country will deal with it all and how its other industries – most notably agriculture (its largest industry) will cope with “a strengthening currency and Chinese competitiveness is squeezing even this most basic of industries.”

So while there is good news for Mongolia vis-à-vis the coal processing project with China, there is always more to the story. Mongolia has other issues with which to deal that are impacting its region on a day-to-day basis.

China’s Tremors Further Quake Housing Prices

Yingjiang County encountered severe damage following an earthquake that shattered Yunnan Province in southwest China.  This resulted in the collapse of many houses, as well as seven fatalities (and perhaps more).  According to the China Earthquake Networks Center the epicenter was monitored at 24.7 degrees north latitude, 97.9 degrees east longitude.

This can’t be good news when the country is attempting (successfully right now) to reduce property prices “with sales volume already falling following purchase restrictions by local governments.”  The attempt is to make housing more affordable for the Chinese.  But with this earthquake home prices are more likely to rise again, undoing all the good work of the local governments.

Wen Jiabao’s Work for Nothing?

It makes one feel bad for the Chinese premier.  Poor Wen Jiabao has been so resilient in his efforts to “’resolutely’ press ahead with controls on the property market…reiterating a pledge to keep housing affordable.”  As well, the government has pledge to take drastic actions on any irregularities that occur in the property market vis-à-vis tax and credit policies, forcing officials to become accountable for home price maintenance.

What the country should really do is to gradually increase interest rates but this should just be one piece in the puzzle of trying to control inflation.  Inflation is also impacted by escalating worldwide prices of raw materials and this has to be accounted for as well.

Mid-East Flare Up Leaves Korea a Mess

 

While China’s economy and finance markets are looking bold and strong, its Korean neighbor isn’t faring quite so well.  The potential of the Middle Eastern mess is once again being blamed for the success and stagnation of the yuan and the won.  Indeed, statistics showed a hit of 345.35 billion yuan (probably supported by short- and medium-term bonds).  Meanwhile in North Korea the “dire economic situation” is so extreme that international food aid calls (which have likely lessened due to missile and nuclear programs) are becoming increasingly louder, apparently to no avail.  On the one hand the country was blaming international pressure for their failure while simultaneously asking the world for charitable handouts.  Despite its attractive-looking economy, China has not been dealing with the Middle Eastern mess so well, and instead psychologically ignoring its very existence, or running into a panic at the thought of what might entail.

China’s Success Mimics Korea’s Failure

So while the Chinese economy is going from strength to strength, the same can’t be said for Korea.  This hasn’t always been the case.  At one time, it was reported that South Korea was providing around 400,000 tons of rice each year to North Korea but once relations between the two started depleting around three years ago, this gift ended too.

Looking towards China though, things couldn’t be brighter.  It seems that Yujiapu is set to be home to “the world’s largest financial zone a decade from now.”  A set of twelve buildings are to be constructed marking just the “first phase” in this new financial world headquarter, really putting the rest of the region to shame.  While their brothers in North Korea are looking for bread and water, the Chinese are enjoying festive banqueting.


 

Taiwanese Investment News

 

 

Good news for Taiwanese investors follows the recent announcement from Taiwan’s Ministry of Economic Affairs that Taiwan will be opening up its technical sector (that until now had been extremely closed) to Chinese investment (which will begin slow).  This comes simultaneous to relations between China and Taiwan that are “steadily improving.”  As well, it is in sync with the work Ma Ying-jeou (Taiwan’s President) has been doing to “bolster the island’s economy” with help from the Chinese.  Part of this is buying products from Taiwan.

 

Economic Status of China Versus Japan

 Last quarter, China jumped in to second place in the world’s largest economy, pushing Japan out.  This is quite a significant jump considering its Communist isolation some years ago.  Figures for the second quarter were Japan’s GDP at $1.288 trillion (China at $1.337 trillion). Japan’s yearly GDP is $5.07 trillion, with China’s exceeding $4.9 trillion. China took the world out of the global recession last year, given its huge economy (over 90-times larger than in 1978 when Deng Xiaoping [the country’s premier] eliminated mega-Communist policies, replacing them with free-market reforms).  By 2027, China will even be superseding America as the world’s biggest economy where GDP is approximately $14 trillion per year according to Jim O’Neill, chief economist at Goldman Sachs Group Inc.

China’s Wealth Gap


On 27 February, Wen Jiabao (China’s Premier) compared the country’s economic development to a cake that needed to be larger and more evenly distributed.  He insisted it was essential that the government take on the task of “ensuring fair income distribution” over the next five years.  This is not just for the country’s economic stability (which of course is important) but also as a measure of “social justice and fairness” in China.  Whilst indeed the country has witnessed significant economic advancement, it still suffers from social/class difficulties such as a “widening wealth gap and slow increase in incomes.”  In some areas this has even led to social conflict which of course will ultimately impact the country’s economy. 
 

Tokyo’s Investments Today


Good news has just been reported for Tokyo this year is the doubling of investment in large Japanese blue-chip companies.  Indeed combined stakes are now worth more than 1.6 trillion yen (which translates to $US19.4 billion).  The stakes do seem somewhat passive (investors remaining tight-lipped on corporate strategy and management).  But the stakes also show the escalating monetary ties between China and Japan as well as China’s increasing financial status.  This is simultaneous to the eclipsing of the Chinese economy and the Japanese economy’s rise in status to second in the world. 
During the second and third quarter of 2010, SSBT OD05 Omnibus Account Treaty Clients (a shareholder) made it to the top 10 shareholder registry of major Japanese companies (Toshiba is also on the list).  Six months prior to this, this was not the case; the shareholder made a significant jump during 2010.