Economy

Chinese Seek Out Investment Opportunities

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China: Challenge and Opportunity

According to Jhal Nath Khanal, Prime Minister of Nepal, “Chinese investors are looking for investment opportunities in every nook and corner of the globe.” Addressing a Trans-Himalayan Border Commerce Association yesterday, he added a request that “the business community furnish details of the prospective areas wherein we can invite Chinese investments in our country.” He sees being a neighbor to China as “both a challenge and opportunity for us.” This was a rather interesting choice of language since in Chinese, the symbol for challenge is the same as that for opportunity. Geographically, he noted, Nepal has the opportunity to greatly benefit “from the development taking place” there.

At the same time however, Nepal recognizes its need to “attain anything that is closer to stupendous Chinese development.”

According to an article in the Nepal Telegraph, there will be an expansion of the Kathmandu-Tatopani Kodari highway and once the border point of Rasuwagadi starts operating to full capacity, “trade between Nepal and China will increase substantially.” Further, Durga Bahadur Shrestha (Trans-Himalayan Border Commerce Association chair) demanded that the Prime Minister “immediately initiate widening the Kordari highway,” with the “existing link being converted to a six lane highway.”

Of course, all geographical improvements and additions in these areas will have a positive impact on trade which will then in turn, improve the situation for potential investors. The more access there is to each place, the easier things are for any kind of trade and investment and this is what Nepal is counting on.

China to Invest in Cambodia?

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According to the Cambodian Ministry of Commerce, a group of Yunnan province investors (in China) has been looking into Cambodian investment opportunities and has found the possibilities most favorable there. The delegation, led by deputy chief of China International Economic Development and Cooperation Office, Cao Junde, met with Cham Parasidh, the Cambodian Minister of Commerce and Vice Chair of the Council for the Development of Cambodia. According to an article in China Daily, the Ministry said that “some of the investors have showed their interest in investing in mining, oil and gas exploration, rice mill and hydro-electricity in Cambodia.” Anyway today, China is Cambodia’s largest foreign investor, with figures reaching $8bn by the end of last year. So it seems like it’s worth the two countries developing better ties as well.

Other Chinese Investments

In other areas of China, investments are being made in Cambodia too. The country’s east Jiangsu province has been looking into investment opportunities there also. The country’s Prime Minister, Hun Sen, is currently visiting China for five days and met with the secretary of the Jiangsu Provincial Committee of the Communist Party of China (CPC), in Nanjing, Luo Zhijun. Jiangsu has a lot to be proud of, having successfully worked hard to get China out of the global financial crisis. The rapid growth of China’s economy has also been beneficial to Cambodia. As well, according to a report in China Daily, Hun Sen said that the “Hongdou Group Co., Ltd., a Jiangsu-based enterprise in clothing, tire, biological pharmacy and real estate, is building an industrial park in Sihanoukville Province, southern Cambodia.” The PM is hopeful that both parties can work together “to develop the industrial park.”

Hun Sen has been working hard to establish and develop good relations between the two countries, especially in regards to “friendly communication, bilateral exchanges and cooperation.” Of course, the PM’s visit will only lead to a further development of “mutual understanding, promote pragmatic cooperation and establish a win-win relationship between the two countries.”

Bangladesh Economic Development News

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Increasing Bangladesh Needs

Bangladesh needs more electricity. In an effort to deal with this, the country is currently trying to acquiesce a further $7bn from foreign investments to construct power plants to respond to this need. According to Senior VP of the Chittagong Chamber of Commerce and Industry in Saudi Arabia, Mahbubul Alam, it is actually worth investing in the country as he has found “lucrative returns” for his country. Indeed, as noted in a recent article, Alam said Bangladesh has developed “massive programs for infrastructure development in partnership with private sectors.”

Electricity Needs

Bangladesh’s population is thriving which is of course a good thing. But the 160 million inhabitants are developing greater needs which are not being fulfilled by the country’s “poorly maintained electricity grid which sees frequent outages during the peak months.” Clearly something needs to be done and a big investment would for sure be a great first step. The fact that the country’s power sector has now opened up to private investment is a good step in the right direction too. Bangladesh is offering a whole slew of new incentives for “private power producers” as well, such as not having to pay corporate income tax for up to 15 years and a waiving of custom duties for plant and equipment import. An agreement for the Avoidance of Double Taxation was also signed a few months ago.

Chinese Goes East

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It seems like there are going to be increased investment opportunities in Russia for China since the former country is in the process of “restructur[ing] its economy and reduc[ing] its reliance on commodities.” This can be seen through Fuyao Glass Industries Co. Ltd., which is one of the world’s biggest auto glassmakers which is now planning on investing $200m in a Russian glass factory. It actually marks Fuyao Glass’ first time branching out onto foreign soil. According to the company’s chairman Cao Dewang, production is set to begin at the end of 2011 and supply glass for over 3 million cars each year.

Increased Business Opportunities

There could be even more business opportunities for Russia with further deregulation of its domestic market which will be good for foreign enterprises. This is already being witnessed by China Investment Corp’s investment plans in Russian “infrastructure, negotiable securities and real estate.” Russia is definitely happy about Chinese investments that according to Federal Financial Markets Service head Vladimir Milovidov will “promote bilateral cooperation on trade and finance.” As well, Russia sees how good China’s financial market supervision policies are for their country.

Great Financial Plans Ahead

Since things are going so well in Russia and China doesn’t want to miss out, the latter country plans to invest $12bn in its market to “boost bilateral trade” by the year 2020. In the first six months of 2010, China invested $260m in Russia which was “58.5 percent higher than the same period of the previous year.” But former Russian ambassador to China Igor Rogachev pointed out some realities: “although China has become Russia's biggest trading partner, China is still not a major investor in the Russian market.”

Vietnam and Myanmar’s Cooperative Talks

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Hoang Trung Hai, Vietnam’s Deputy Prime Minister, recently met with the Minister of Agriculture and Irrigation in Myanmar, U Myint Hlaing, as well as the Minister of National Planning and Economic Development Tin Naing Thein. Topics on the discussion table included cooperation in fields “in accordance with the guidance of the two countries’ leaders.” Economic cohesion was also discussed with an agreement on “early implementation of specific projects and acceleration of the implementation of the existing agreements.”

Big Talks

Other major areas such as politics and diplomacy were also on the discussion table and an agreement between the two countries was made vis-à-vis delegation exchange “at all levels” as well as “people-to-people exchange.” When it came to what can be done to increase regional cooperation, there is already much of this in place. For example, the support Vietnam has lent to Myanmar’s “bid to assume ASEAN 2014 Chairmanship.” As for Myanmar, it reiterated its position vis-à-vis ASEAN East Sea issues “respecting the implementation of the Declaration on the Conduct of Parties in the East Sea (DOC) signed between ASEAN and China, and towards the Code of Conduct in the East Sea (COC).”

More Support

In addition, the opening ceremony of the Vietnam and Myanmar business cooperation conference that Thiha Thura Tin Aung Myint Oo and Hai (VP and Deputy PM of Vietnam) attended in Nay Pyi Taw took place. This was definitely a big cheering contest by both countries, of both countries’ huge achievements and efforts over the years of increased cooperation.

Increased Ties Between Vietnam and Myanmar

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Talks in Vietnam on Cooperation Issues

Following talks in Nay Pyi Taw (Vietnam) last week between Hoang Trung Hai (Deputy PM to Vietnam) and Thia Thura Tin Aung Myint Oo (VP to Myanmar), an agreement was reached between the two countries to “increase cooperation” in areas such as agriculture, aviation, oil, automobile, finance and more. On the table for discussion was the countries eco-political status, bilateral relations and possible ways of “boosting cooperation” in the near future, especially vis-à-vis developments in economic trade vis-à-vis what has been the case in the past. Further, if Myanmar has better conditions, Hai said, there would be more Vietnamese firms working there.

Other Cooperation

Myanmar and Vietnam also saw the possibility of cooperation from other countries within the ASEAN and sub-regional framework like “cooperation between Cambodia, Laos, Myanmar and Vietnam (CLMV), the Ayeyawady-Chao Phraya-Mekong Economic Cooperation Strategy (ACMECS), the Greater Mekong Sub-region (GMS), East-West Economic Corridor (EWEC), the South Economic Corridor (SEC) as well as at international fora.”

Animal Husbandry Cooperation

A memorandum was then signed on cooperation of animal husbandry between the Myanmar Ministry of Livestock Breeding and Fisheries, and the Vietnam Ministry of Agriculture and Rural Development as well as a MoU on development cooperation between Myanmar’s Ministry of Finance and Revenue and the Vietnam Ministry of Finance.

Good Working Background

There is space for substantial optimism since Myanmar and Vietnamese leaders both recognized efforts and achievements that have been made in business over the last few years, especially this year with the implementation of the April high-level agreement, “creating favorable conditions for business and cooperation.” There is much work to be done still, but it looks like it’s a very positive environment in which to do this.

Chinese Investment in Africa

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Arab Spring Ramifications

China is showing less “enthusiasm” for making investments in various parts of Africa which has likely been caused by the “ramifications of the Arab spring.” Investments in the past have been extremely popular, due to what has been seen as very attractive conditions such as “lots of autocrats and presidents-for-life, very few rules and regulations, little concern for life or environmental impact.” According to a recent article on the matter, pretty much anything has been possible “as long as the money kept showing up in the appropriate offshore accounts.”

But this was the situation in the past and things are now changing. With a new five-year plan from the country’s Ministry of Commerce (which is still being finalized), investing in Asia just isn’t “what it used to be, according to a quote from the Economic Observer. For example, it is just much harder now to open a mine there as factors such as the environment, employment and economy need to be taken into consideration.

China in Libya

Looking to Libyan investment (which has been a more recent popular jaunt for Chinese investment), there is an anticipated expected surplus of $3bn loss due to the repatriation of approximately 36,000 Chinese employees. As well, over the last four years, Libya has “contracted some 50 engineering projects to Chinese companies, including several image projects to mark the 40th anniversary of the 1969 revolution.” According to the article, being a contractor however, China has been able to manage its “direct losses in the unrest.” Nonetheless, some of its assets in Libya (such as Sinopec) did encounter destruction in the aftermath of the Libyan unrest. In general however, Beijing has had to somehow cope with a big mess of “compensation claims, third party debts and the re-employment of all returned workers.”

Chinese Investment Drop

Figures released from the Ministry of Commerce have shown a huge plummet of new Chinese contracts in North African countries for the first quarter. In Algeria this drop was 70.8 percent and in Libya, 46.9 percent for the same timeframe of 2010.

Good Times Ahead for China

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Property Peaks in Beijing

It looks like China is set to witness a property peak in the few months. According to experts in foreign real estate funds, this sector is due to “tighten” during this time frame. Grosvenor Asia Pacific manages $16b in assets and is setting out to raise “at least $270 million for a fund that will invest in Chinese properties as part of its expansion in Asia.” According to CEO of Savills Greater China, Raymond Lee, “a good opportunity will emerge for long-term investors in the coming six to 12 months, and what foreign real estate funds are doing now is finding a legal fund vehicle that can get their money into the country.” Indeed, substantial funding is expected to get to China before 2012 as well.

Increase in Investment

News from the Commerce Ministry is the increase in “utilized foreign investment” by 27 percent, reaching $17.8b by February 2011. Of this, $4.15b was in the real estate sector. In an effort to curb this, local authorities were ordered to “halt the approval of some foreign property investments to stop speculative purchases, it said in a Nov 22 statement.” Local authorities will have to “strengthen their reviews of foreign exchange inflows for real estate transactions and documentation for land rights.” Right now there are two principal channels for foreign capital that “flow into the Chinese mainland’s property market”: participating in development with local partners and cooperating with Hong Kong-listed real estate companies.

Real Estate Firms Future

According to President of CB Richard Ellis China, small- and medium-sized real estate firms are likely to feel an additional squeeze by June that will result in more “equity investment opportunities for foreign institutional investors.” This is due to banks making it harder to borrow money and dropping property sales. Prices of residential projects will be “more competitive.” As well, for those medium- and high-end homes which witnessed “excess short-term price growth,” are being impacted by government real estate “tightening” policies. The advice by experts thus is to avoid these sectors to protect your investment. Ultimately, even though foreign investors have expressed concern about the potential risks in China, a “clear long-term picture through the 12th Five-Year Plan” is still what’s keeping confidence high and bringing investors back to China all the time.

New Zealand New Hotspot

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Chinese NZ Investment

New Zealand is becoming an increasingly more attractive to investors. This has been especially evident in China which has been purchasing more NZ bonds than ever. Recent reports show that investments from China could amount to $6b which will have an impact on the kiwi dollar that could increase to 81 cents (which would be a three year peak) “against the greenback.” According to Craigs Investment Partners market analyst Peter McIntyre, “there have been reports that the Chinese foreign exchange reserves are looking to diversify around about 1.5 percent of their assets into New Zealand denominated assets like government bonds, companies and dairy farms.”

Nice New Zealand

That is one way of describing the country. Nice. New Zealand is definitely “nice” for investors since in terms of financial security, it is very stable. There is also a “high domestic inflation rate” with large returns too. It seems to be the whole region is finding New Zealand attractive, most notably Singapore and Hong Kong which are looking into government bonds.

These changes have been happening for a few years now. Countries in Asia are boasting “very large reserves.” There is likely to be additional investments ahead too. China will see an increase in investment from BUD, the Brazilian-Belgium owned Anheuser-Busch InBev and intends to establish a “brewery to make Budweiser in the mainland by the third quarter,” according to Carlos Brito, CEO of the company. The intention is to put in “several hundred million dollars this year.”

Better Beer

The three “top-priority markets” set to “drive the volume growth of the global beer industry,” are: Brazil, China and the USA. Indeed, China alone drinks around 30 liters of beer per annum, rendering it “responsible for around 25 percent of global beer consumption.” Just last week the first brewery was launched by AB InBev in Sichuan, a southwest China province, which according to the company’s Asia Pacific president Miguel Patricio, “aims to better serve the 200 million consumers in the region.” So if you happen to be visiting the Great Wall, consider quenching your thirst with a barrel of beer.

al-Assad Meets Arab Businessmen

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Last Saturday, President Bashar al-Assad met up with a whole delegation of Arab businessmen, where they discussed the “status of the Arab investments in Syria and their future in light of the comprehensive reforms witnessed in Syria.” Other topics under review included how investments are meant to help the national economy along with their participation in reform and the creation of stability. The President was extremely appreciative of the additional investments to Syria that have been made by Arabs “in spite of all the circumstances,” since such investments have “a promising future.” The investors were also pleased, especially with the reforms occurring in Syria that are said to “reflect positively on all the spheres.” Other potential problems were discussed vis-à-vis what has been making investors’ work tough and how to put into practice various methods needed to ease permits that will assist in improved growth rates while creating additional jobs for youths. The Arab businessmen were delighted with the President and his devotion to reform, especially since he was aware of all the issues that have been “hindering work.” Thus he has been encouraging moving ahead with investment projects in a job creation initiative.

Syrian Investment

There has been increased confidence in Syrian investments and that things in general are going well. Further, new procedural reforms will affect “facilitating investments” especially given the President’s “quarterly meetings with Arab investors to inform him of the problems hindering projects and progress of existing projects, adding that this made the investors very comfortable as there is a mechanism through which they can achieve their goals.” In addition, Anas al-Kezbari, (Investment in Syria Group CEO), said that President al-Assad’s meeting gave everyone much confidence in Syria’s economy and that given the reforms, any investments that are likely to “achieve economic feasibility and benefit[s] Syrian citizens” will receive “great momentum.” Further, Syria’s economy is likely to be subject to a huge “upswing in the next stage,” that will lead to further job opportunities. New investment projects will also begin, further stabilizing the economy. So in general, President Bashar al-Assad’s meeting went really well. There is a lot of confidence and now a lot of potential for the Syrian economy, as well as a real potential for improvement in the quality of life for Syrians, especially those currently unemployed.