China

China Rapidly Becoming Largest Importer in the World

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According to China International Capital chief economist Liang Hong, China is on its way to becoming the largest importer in the world. Experts estimate that China’s current imports, which total at $1.5 trillion, will surpass the United States’ $1.8 trillion by 2020.

A primary factor is a significant increase in domestic consumption in the region. Growth will also rely on the continued increase in property investment, urbanization and significant manufacturing potential.

“China will not depend on iron ore, Boeing aircraft or sophisticated products to be the largest importer, but what people eat and drink,” Liang explained.

Imports hold a prominent role in food supplies.  80% of the region’s soybean relies on imports, for example.

 

Blackstone Sees China as Investment Hotspot for 2012

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The Asia-Pacific leader of Blackstone Group L.P. recently announced that the firm views China and Southeast Asia as the top two hot spots for Asian investments next year.

“Certainly China will remain a core focus for us. We are long-term very bullish about China,’ said Michael Chae. “Southeast Asia, and Indonesia in particular, we also think it quite interesting.”

He went on the add that Asia is still strongly tied with the West, and that volatility in both global and Asian markets is impacting investment moves now, and will continue to do so throughout 2012.

“There’s an above-average level of uncertainty around macro conditions in this region and globally, which makes it a really intellectually interesting time to be alive and to be investing,” Chae said.

Investments in growth markets such as China focuses on consumption, he said. Blackstone, therefore, will put an emphasis on consumer retail, healthcare and healthcare products, leisure and pharmaceuticals.

“In China and some of the other emerging markets in Asia, this is sort of a truism by now for investors, domestic consumption growth, growth of the middle class and urbanization themes,” he said.

Asia Headed Towards Becoming Largest Corporate Market by 2015

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Global consulting firm McKinsey & Co released a report stating that global corporate and investment banks will get almost 50% of their revenues (around $799 billion) from Asia by 2015. The leading countries will be China and India. In 2010, the revenues originating in Asia constituted nearly 33%, or $442 billion.

The report, entitled ‘Asia: The Future of Corporate and Investment Banking’, stated: “The surprisingly strong economic health of Asian economies in 2010 saw the risk-adjusted corporate and investment banking (CIB) revenues from the continent, touching nearly $442 billion, just under a third of the global total. But by 2015, this revenue pool will rise to about $790 billion by 2015 or 45% of the global CIB revenue.”

Akash Lal, McKinsey partner, said “Asia will become the largest and fastest growing region in the wholesale banking universe by 2015.”

He continued, explaining that the market will change dramatically as new investors, more demanding customers and multi-regional businesses join the industry. According to Emmanuel Pitsilis, senior partner and Asia corporate and investment banking practices leader, the biggest challenges in the growing industry will be regulation and very intense competition.

“Global banks will have to find a path to become more Asian by making the right investments from both business as well as geographical perspectives, apart from building a business model that is both profitable and durable,” he explained.

China’s Economy Threatened by Global Crisis

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Chinese leaders have implied that times may get tougher for the country’s exports with a warning that the global crisis may impact the nation’s economy.

Vice Premier Wang Qishan, the top financial official in China, encouraged companies to contribute their efforts to securing a “stable increase” in exports, despite the lessening of external demand.

“The severe and complex world economic situation will inevitably mean global demand is insufficient,” Wang said.

Over the past year, China’s exports increased 15.9%, or $157.49 billion, down from the $169.7 billion of the previous year. The fall is a result of decreasing demand in Europe and the U.S.

Chinese Commerce Minister Chen Deming agreed with this approach, also warning that the global woes may have negative results on the nation’s economic growth next year.

“Under the influence of the contracting international economy and market, China’s economic growth next year may slow slightly,” he said.

China’s Stock Market and Greece’s Referendum: Michiya Tomita

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Asian stocks have fallen for three days as Greece’s referendum plan heightens concerns that the debt crisis will not be contained. Hong Kong stocks reconvened as a result of beliefs that China will now act to stimulate its economy.

The MSCI Asia Pacific Index fell 0.6% to 118.41 in Tokyo, while three stocks fell for every two that rose. Meanwhile, banks like the Industrial and Commercial Bank of China, as well as developer and infrastructure companies rallied with hopes of an economic boost from the government.

“A loosening of monetary policy in China could support the stock market,” said Michiya Tomita, who helps oversee billions of dollars for Mitsubishi UFJ Asset Management Co. “Any gains may not be sustainable as uncertainties in Europe persist. Investors are taking a wait-and –see attitude.”

Pakistan to Maintain Close Chinese Relations

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It has been agreed that “cordial relations” will be maintained between China and Pakistan.  According to Inamul Haq (the country’s former state Minister for Foreign Affairs), everyone is in total agreement on this.  At a recent seminar, he said that Chinese investments and projects in Pakistan had reached $25bn and that this figure was increasing all the time.  He said, “I believe that the US will not leave Afghanistan which is a center from where they can watch China, Pakistan, Iran and other important regional players.  Afghanistan is home to billions of gold and copper reserves while same is the case with Pakistan which has untapped reserves of gold, copper, oil and gas worth billions of dollars.”

Efforts by Chinese Government

In addition, according to an article in Dawn Prof. Zhong Rong said the Chinese government had been making significant efforts to “ensure economic development in Xinjiang province.”  The country is about to invest substantial capital in Xinjiang to try and increase the GDP ratio “and per capita income of the people of Xinjiang Province.”

Property News: Thailand, China and Hong Kong

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Looking into various parts of Asia, one might not want to seek out a new home there just right now.  Property prices are going through the roof, excuse the pun, and wealthy Thailand is taking advantage.  According to an article in the Bangkok Post, a property developer from Thailand, Pace Development, just recently “launched sales of its luxury Bangkok project MahaNakhon to Hong Kong buyers.”  Records over a mere three days show of “sales worth 350 million baht.”

On the flip side, for those who have something to sell, now is the time.  According to executive director for investment and project marketing of property consultant CB Richard Ellis, Rebecca Shum, now is “the best time to sell property to Hong Kong buyers as prices there were very high.”  The prices for property in Hong Kong are really high these days.  Indeed, they have gone up around 20 percent in the last year and just haven’t come down at all.  Hong Kong and Chinese investors are seeking out properties in other parts.

Hong Kong Prices Peak

Indeed, Hong Kong prices are these days five times more than for the same size in Bangkok.  New units are approximately 1.2m baht per sq m.  Hong Kong and mainland China investors these days therefore seem to prefer “buying property as an investment as the interest rate for deposits was only 2%, which is unattractive to those who refuse to carry cash.”

Bangkok Boom

The truth is, as Shum has noted, “Bangkok is still a top-two destination for lifestyle in the eyes of investors in Hong Kong. Their interest in luxury Thai property is driven by a lift in optimism about the overall political and economic environment in Thailand.”  In addition, the new government has promised to put policies in practice that with “stimulate economic growth immediately.’  This will result in the progression of “major infrastructure projects,” as well as “provide long-term support to economic expansion and be reflected in asset price appreciation, particularly for luxury properties.”

Vietnamese Investment Interests

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Laos, Land of Opportunity?

Just yesterday, a seminar took place on investment possibilities and cooperation at the Laos Vietnamese embassy.  Over two hundred Vietnamese business representatives were in attendance.  Ta Minh Chau, Vietnamese Ambassador, addressed the seminar and pointed out that Laos is a “peaceful country” with huge potential in many areas, especially financial.  Vietnam and Laos have a “special relationship,” with significant support from the Lao Government that has worked hard to establish optimistic and facilitative conditions for the thriving of Vietnamese business investments there.

Indeed, such good relations can be witnessed in the success various Vietnamese businesses are enjoying in Laos, most notably, the Hoang anh-Gia Lai Group, Lao-Viet Bank, Long Thanh Golf, and Song Da Corporation.

In addition, there are many areas in Laos that Vietnamese businesses could be interested in, such as: coffee, rubber, cotton, banking, agriculture and more.  According to a news report the embassy was asked to give Vietnamese  businesses, “information on the legal requirements of both countries to facilitate their investment in Laos.”

It seems that Laos is quite a popular place for foreign investments these days.  According to the Investment Promotion Department of the Ministry Planning and Investment, India is now ranking in the top 10 foreign investors there with more than $359m.  Other countries on the list are: Australia, China, France, Japan, India, Malaysia, Republic of Korea, Singapore, Thailand and Vietnam.  Thailand is definitely the number one investor, ranking in at over $2bn.  The most popular area for investment is the field of electricity.

Big Burmese Bucks

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In the last year, Burma was the recipient of $20bn in foreign investments.  Not only is this figure alone  impressive, but it is a huge development when looking at last year’s figure which was $302m.

So where did all of this money come from? Well, according to a recent BBC News article, it seems the Chinese are pretty big fans of Burma, making the largest investment of foreign countries, mainly in power-based projects.  Indeed, according to another Chinese-investment-based news report, Chinese companies have been the financier of a great deal of Burma’s major hydropower projects, despite political unrest in the region.

It has not been an easy ride all the way for China making these investments though.  Nonetheless, according to the Ministry of National Planning Development, its staggering $8.27bn investment from March 2010-11 was substantially larger than the next country in line being Hong Kong at $5.3bn and then Thailand at $2.94bn.

In addition, it was reported that “China is looking only for minerals, they are looking for economic benefit. That is all. That is damaging the country. They are not even making peace.”  So the fact that China has been desperate to make such efforts at pursuing investment returns, no matter what the cost, hasn’t been great for the country.  For sure it on some level makes sense for China to invest in places the West avoids as it doesn’t have to deal with such a high level of competition but still, various events including the work conducted “on the China-backed Tasang Dam in Burma proves that China is not immune from the same geopolitical concerns that keep others from parking their capital in ‘rogue states.’”

Political Impacts

Of course, the political scene is bound to have an impact on all of this too.  When polls were taken in Burma last November, it was the military based parties that won the most amount of seats.  Indeed, just looking at the 2008 constitution, a staggering quarter of seats were anyway reserved for this group.  It might have been just this fact that led to the criticism of polls by western nations and opposition groups; it seems that there is no choice pretty much, but to back a military-based party.