Wild ride - China Economic Review

Transcription

special report
China in the US election
china-japan relations
The real cost of the dispute
November 2012 Vol. 23, No. 11
www.chinaeconomicreview.com
pekingology
Inside Beijing’s transition
Wild ride
China brings the commodity
super-cycle to an end
FOCUS: BANKING & FINANCE
featured content
November 2012 Vol. 23, No. 11
6
November 2012
VOL. 23, NO. 11
6 pekingology | The most important division in
Chinese politics today is not among top leaders
6 CREDIBLE THREAT | The US must differentiate
security threats like Huawei from economic opportunities
8 TURF VersuS TRADE | China and Japan
can’t afford their territorial dispute
14
14 FOR LOVE OR MONEY | In Chinese soccer,
cash and optimism abound
20 CHINESE WHISPERS | A review of Yu Hua’s
“China in Ten Words”
28
24 MARCH OF THE PENGUIN | Gabrielle Coyne
of Penguin discusses China’s literary appetite
28 special report | Will presidential promises
to get tough on China really help the US?
31 DIPLOMACY IN ACTION | Kenneth Lieberthal
on why the US should root for Chinese success
34 POOR PROSPECTS | China’s slowdown
plunges commodity markets into uncertainty
38 divining the truth | Who should investors
34
Cover
Story
believe when betting on copper futures?
41 INTO THE LOWLANDS | Benelux’s bid to become
a European hub for Chinese finance and trade
CONTENTS
Published monthly since 1990
COVER by andrew mok: Find the Canada-based illustrator at www.andrewmok.ca
16 putting down roots | Chinese students abroad weigh returning to the motherland
18 POSTCARD FROM TOKYO | The global economy is now at the mercy of politics, writes Frederic Neumann
22 HOT SEAT | Bill Dodson on whether climate change will bring on China’s “Sputnik moment”
CHINA ECONOMIC REVIEW
(ISSN: 1350-6390) is published by
China Economic Review Publishing
26 MONEY AND DRUGS | L.E.K. Consulting on where the pharmaceutical industry should put its money
Enquiries
[email protected]
37 BET THE SPEND | Investing in metals grows trickier in the post-boom era
45 TO BE OR NOT TO BE | Benelux rescues its union from redundancy
Month in review
10 news Roundup | GDP slips, the stock market dips and Lenovo grips No. 1
10 China by numbers | $1.2m: Prize money for China’s first Nobel in literature
12 second thoughts | A new Pew poll shows more Chinese worry about the ills of development
After the close
4
Publisher
China Economic Review Publishing
Editor
Ana Swanson
Senior Staff Writer
Jake Spring
Staff Writer
Don Weinland
Research Manager
Sarah Wu
Researcher
Stella Xie
Contributors
Bill Dodson, Frederic Neumann, Stephen
Sunderland, Helen Chen, Cameron
Wilson, Thy Vo
Interns
Engen Tham, Finlay Walker, Ali Haupt,
Niu Ning
Art Editor
Jason Wong
Art Director
Frank Zheng
Editor at Large
Graham Earnshaw
Associate Publisher
Gareth Powell
Director of Sales
Obie Gao
48 Company index
48 Listings
52 Indicators
54 china buzz | “This is shaping up to be an election to select the person who gets to apologize to China.”
China Economic Review • November 2012
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Pekingology
G
one are the days when the international
community didn’t know Hu from Wen.
Western media coverage of China has
increased exponentially in the past decade. Now, as
China enters into a once-in-a-decade leadership
transition, the world is paying attention.
Time magazine’s October 22 cover featured
the face of Xi Jinping, China’s probable next paramount leader, plastered over with the words “The
Next Leader of the Unfree World.” Many in the
West have heard of the disgraced politician Bo
Xilai, even if they don’t know how to pronounce
his name. The world has woken up to Chinese
politics. Unfortunately, as this coverage shows, the
significance of that politics is still far from clear.
The Chinese government and media have shed
little light on Xi’s governing philosophy and policy
preferences. Does Xi’s experience in rural Shaanxi
province during the Cultural Revolution mean he
will be a champion of the poor? Does his work as
party secretary in Zhejiang province demonstrate
his support for a more vibrant private economy?
It’s difficult to say.
Both Xi and the party have gone to great
lengths to conceal any points on which his views
might depart from the consensus of the current
top leaders. This is understandable: Since the single-party system has no mechanism to deal with
dissent, exposing these fault lines publicly could
easily weaken his authority. Xi still lacks the political capital necessary to unite all of the diffuse view
points within the government.
Much of the current analysis of China’s leadership transition is based on the work of Cheng
Li, a senior fellow at the Brookings Institution.
Li’s careful research breaks China’s current crop of
Imaginechina
The most
important
division in
Chinese
politics today
is not among
top leaders
but between
them and the
country’s
other
entrenched
interests
seats of power: Delegates gather in the
Great Hall of the People in Beijing in March
leaders into three primary factions: those who rose
to power through the Communist Youth League,
such as current paramount leader Hu Jintao and
probable future premier Li Keqiang; those who
had the patronage of the Shanghai Gang and former paramount leader Jiang Zemin; and “princelings” who gained power through prominent political families, such as Xi Jinping and Bo Xilai.
Li’s research is now widely cited; even the Time
magazine article on Xi relied on his analysis. But
as groundbreaking as this work is, it is of little use
in determining China’s probable course. While
factional ties are vital in determining which politicians rise to the highest levels, they reveal little
about policy positions. Historian Zhang Lifan
describes the factional division as one between
the managers of a company (the CYL) and the
sons and daughters of company shareholders (the
Credible threat: The US must distinguish between security risks like
Huawei and economic opportunities
Imagine an attack on the US that poisoned
water supplies, derailed trains and caused
power outages across large swathes of
the country. Such an offensive would likely
require a large strike force networked
across the US, a difficult feat given vigilant
post-9/11 efforts to combat terrorism.
Unless, of course, the US has already
gone to the trouble of creating a network
ready to be exploited – such as its telecommunications infrastructure. In a speech in
early October, US Defense Secretary Leon
Panetta warned of the threat of a “cyberPearl Harbor” if hackers affiliated with
6
extremist groups or aggressor nations
attacked transportation, energy or other
vital infrastructure systems in unison.
Panetta did not explicitly state which
nations might be aggressors, but China is
undoubtedly on the list. Only days before
the secretary’s speech, the US House of
Representatives Intelligence Committee
released a report arguing that Chinese
telecom equipment maker Huawei could
contribute to this cyber-threat if allowed
to operate in the US. The report recommended that the Committee on Foreign
Investment in the US (CFIUS) and other
government agencies do what they could
to halt Huawei’s US expansion.
Critics of the report have labeled it an
unfair attempt by US politicians to rally
voters around anti-China sentiment. But
while US politics is rife with such examples of political point-scoring against
China, Huawei’s entry into the US could
present a legitimate threat.
The potential risks of Huawei’s technology outweigh the potential benefit of
its US investments. The closely-held company lacks transparency, has close ties to
the People’s Liberation Army and deals in
the house view
Phalanx formation
The lack of transparency at the top makes
it difficult to predict China’s future. But
the fact that Xi and the party are so wary
of exposing any fault lines is in itself an
important lesson, with implications for
China’s ability to rebalance its economy.
Economists now widely agree that
China needs to shift its economy away
from investment and toward consumption and services to sustain long-term
growth. China’s economic data for September showed what may be the first
signs of that rebalancing process. In the
first three quarters, consumption contributed more to GDP growth (55%) than
investment did (50.5%).
This is an encouraging sign, but it’s
far from mission accomplished. Infrastructure spending has surged in recent
months as Beijing tried to cushion an economic slowdown. Investment in railways
climbed 78% year-on-year in September.
If this trend continues, investment could
easily outweigh consumption as the main
driver of the economy for the full year.
Rebalancing necessitates not just tipping the balance of growth but reforming
the country’s economic structure. Chief
among these reforms is changing the way
capital is distributed. The Chinese banking system is set up to channel funds from
the general populace to well-connected
state-owned companies, which mostly
invest the money in fixed assets of dubious social value. Rebalancing will require
Beijing to stem this flow of cheap capital to SOEs and allow China’s consumers and small businesses to play a greater
economic role.
These changes will clearly compromise the interests of powerful stateowned companies and banks. The reforms
needed to rebalance the economy – as
advised in the “China 2030” study by the
World Bank and the National Develop-
ment and Reform Commission – could
displace 5 million SOE workers and an
equal number of government agencies,
according to Minxin Pei, the director of
the Keck Center of International and
Strategic Studies Education at Claremont McKenna College.
As the new helmsman, Xi will likely
lack the political capital for some time to
oppose these powerful entrenched interests and push through such dramatic
reforms. Reforms to rebalance the economy are thus likely to proceed only incrementally, prolonging concerns over the
sustainability of China’s growth model.
More information on the Chinese
political process is available than ever
before, both within China and abroad.
But foreign audiences still seem to know
little about the most significant political
division in China. It is not between the
princelings and the Communist Youth
League, but between Beijing and the diffuse parts of the economy it must rally to
accomplish its goals.
The focus now should be not on Xi’s
personal predilections but on the more
than 70,000 local officials he will have to
muster to his cause.
technology vulnerable to hacking. Huawei
also seems ill-positioned to turn down the
Chinese government, which maintains tight
control of the domestic economy, if it seeks
to use the company’s devices for espionage.
The US already broadly suspects China of
cyber espionage, including unproven allegations in the hacking of the US-China
Economic Security Review Commission last
year.
But these concerns should not necessarily extend to other deals. One such
example is China National Offshore Oil
Corporation’s US$15.1 billion takeover bid
for Canada’s Nexen, which drills for oil and
gas in US-controlled portions of the Gulf of
Mexico. US politicians are similarly painting
this deal as a threat to US national security.
But unlike Huawei’s US expansion,
CNOOC’s control of Nexen would only be of
strategic importance in the unlikely event of
an open conflict between the US and China,
when the two countries could move to block
each other’s resources. If this occurred, US
military strength would mean far more than
CNOOC’s signature on a contract.
Congressional criticism of the pending
Nexen takeover harkens back to CNOOC’s
bid for US energy company Unocal in 2005.
At that time politicians successfully fought
to kill the deal on mostly symbolic fears of
China taking over such a large US company.
Although legislators cited security concerns, those appeared to be just one more
rhetorical tool to stop the takeover.
But much has changed since the Unocal
days. Most importantly, the US is in a
far weaker economic position. It cannot
afford to turn away companies from the
world’s second-largest economy – which
invested more than US$1.3 billion in the
US in 2010 alone – unless they truly present a threat to national security.
US voters consistently say that their
top concern is the economy. When it
comes to vetting Chinese investment
in the US, politicians would do well to
remember that. Regulators, including
those with CFIUS, need to distinguish
the companies that present legitimate
security threats from those that don’t.
Otherwise, Chinese companies will vote
with their wallets and take their business
elsewhere.
princelings). These groups may derive
their power from different sources, but
that’s no guarantee of their ideology.
Though they are both princelings,
for example, Xi Jinping wanted nothing to do with Bo Xilai’s ultra-left-wing
policies. Despite their different factional
backgrounds, potential Politburo Standing Committee members Wang Qishan
and Wang Yang are both known for their
support of economic liberalization.
The reforms needed to
rebalance the economy
could displace 5 million
SOE workers and
an equal number of
government agencies
7
Month In Review
china by numbers, p10
$1.2m: Prize money for
China’s first Nobel in
literature
second thoughts, p12
More Chinese are worried
about the ills of economic
development
CREDIT: Al Jazeera English
news roundup, P10
GDP slips, the stock
market dips and Lenovo
grips No. 1
brie fing
Turf versus trade
China and Japan can’t afford a heated dispute amid their cooling economies
I
n early October, China’s top banks
and central bank governor Zhou Xiaochuan pulled out of a high-profile
IMF and World Bank summit in Tokyo
in protest of Japan’s recent purchase of
disputed islands in the East China Sea.
Zhou, the scheduled keynote speaker,
dispatched a deputy to deliver his speech
instead.
The snub of top-level negotiations
illustrated the cost of China’s escalating
tensions with Japan. Japan reignited a
long-standing territorial dispute in September when it bought an island chain,
known as the Senkaku in Japanese and
8
the Diaoyu in Chinese, from its private
Japanese owner. Thousands of mainlanders have since taken to the streets in protest, vandalizing Japanese businesses and
even brutally beating a Chinese man for
driving a Toyota.
Old habits die hard
Japan and China have only fueled the fire
with a public blame game. At a meeting of
the UN General Assembly in September,
China blasted Japan for the “illegal and
invalid” island purchase and its “obsolete
colonial mind-set.” That prompted Japanese Prime Minister Yoshihiko Noda
to aver Japan’s “unwavering resolve to
defend its territorial lands and waters.”
The economic toll of a major dispute between the world’s second- and
third-largest economies could be as dire
as its political consequences. Mass boycotts continue to hurt Nissan and Toyota,
which reported their worst Chinese sales
since 2008. In September, China Eastern
Airlines saw international sales drop 18%
from the previous month, while Japan’s
two largest airlines reported cancellations on some 60,000 tickets for flights
between September and November.
Analysts warn a prolonged dis-
month in re view • news roundup
ECONOMICS & TRADE
China’s GDP growth slipped to 7.4%
year-over-year in the third quarter, the
seventh consecutive quarter of declining
growth. Consumer prices rose just 1.9%
in September, the slowest pace in two
years, while producer prices hit a threeyear low. However, the pace of retail
sales, industrial production and fixedasset investment growth each picked up
in September, triggering speculation of a
coming recovery. Industrial production
expanded 9.2%, up from 8.9% in August,
while retail sales grew 14.2%. Growth in
fixed-asset investment, excluding rural
households, improved to 20.5%. Trade
figures also surpassed expectations,
with exports reaching a monthly record
of US$186.4 billion, a 9.9% gain on the
previous year, and imports increasing
2.4%. The World Bank lowered its
projected full-year 2012 growth rate
for China from 8.2% to 7.7%. “China’s
slowdown this year has been significant,
and some fear it could still accelerate,”
the World Bank report stated.
15.5%, figures from market research firm
Gartner showed. Bain & Co predicted that
growth in China’s sales of luxury goods
will slow to 8% this year from 30% last
year, triggering a global slowdown in the
market.
CONSUMER
Retail sales growth during the October
National Day holiday slowed compared
to last year, climbing 15% during the
eight-day break, down from 17.5% growth
during a seven-day holiday a year earlier.
Nike reported a 12% decline in fiscal firstquarter profits, and its futures orders in
China dipped for the first time since 2009.
In comparison, Yum! Brands increased
its annual profit forecast as a result of
higher-than-anticipated earnings in the
third quarter. Strong growth in China
continued to drive sales and operating
profits for the parent company of KFC,
Taco Bell and Pizza Hut. China’s Lenovo
overtook Hewlett-Packard as the world’s
largest personal-computer maker. The
company’s shipments accounted for
15.7% of the world’s PC shipments last
quarter, ahead of the former No. 1 at
china by numbers
Travelers on China’s
highways on the first day
of the October National
Day holiday
Imaginechina
8m
10
taking stock: The Shanghai Composite Index
fell below 2,000 for the first time since 2009
CREDIT: achimh
A diplomatic exit
The dispute has reemerged during sensitive political times. China is heading
into a once-a-decade political transition,
while simultaneously combatting slowing
growth numbers and rising unemployment.
In Japan, poor approval ratings and a
standoff in parliament with the opposition party threaten to throw Noda out of
office. In these troubled times, leaders on
both sides may be eager to allow nationalistic sentiment to distract their people.
Chinese leaders have bolstered antiJapanese sentiment in the past. In 2005,
authorities tacitly supported an online
petition calling on Beijing to oppose
Japan’s membership on the UN Security
Council until the country acknowledged
historic crimes. Officials looked the other
way as demonstrations turned into beatings and lootings, cracking down only
as protestors turned to march toward
Tiananmen Square.
However, there are signs that both
countries are looking for an exit. New
talks between senior officials suggest
heads are cooling as both countries feel
the economic effects.
In an interview with Bloomberg in
mid-October, Noda struck a more conciliatory note. “If our ties cool, particularly
economic ones, then it isn’t a question of
one or the other country suffering. Both
countries lose out.”
newsroundup
Imaginechina
pute could have broader effects on a
still-struggling global economy. Trade
between the two Asian giants, estimated
at more than US$340 billion, props up
other regional economies and supply
chains.
Disruption in the supply of finished
goods manufactured in China – many
utilizing Japanese parts and machines –
could spur shortages and raise prices. Japanese exports to China fell 14% year-onyear in September amid the dispute, with
car exports decreasing 44.5% annually.
FINANCE & MARKETS
The Shanghai Composite Index fell below
2,000 points for the first time since 2009,
as the economic downturn weighed on
stocks. Chinese banks lent US$99.5
billion in September, according to the
central bank, down from US$112.5 billion
in the month before and missing analysts’
expectations of roughly US$111.6 billion.
M2, the broadest measure of money
supply, jumped 14.8% year-on-year at
the end of September. Reports citing
anonymous bank officials said China’s
top four banks were resisting government
$1
Losses China’s biggest
solar panel makers will
suffer for every US$3 of
sales this year
Estimated turnover of
key positions in China’s
political transition
70%
Source: Xinhua, The New York Times, China Leadership Monitor, Xinhua, Mashable.com, Reuters
month in review • news roundu p
instructions to decrease lending rates in
an attempt to maintain profitability during
the economic downturn.
PROPERTY
Housing prices in 100 Chinese cities rose
by 0.17% month-on-month in September,
according to research agency China Real
Estate Index System, slightly less than
in August as government restrictions on
housing purchases aimed at dampening
the market continue. The data came amid
recent evidence of market strength. Landtransfer revenues in 10 major cities grew
49% month-on-month to US$7.7 billion
in September, the highest growth of the
year, according to data by the E-House
China R&D Institute. Transferring lease
rights to developers is a major revenue
source for local governments, and the
September figures suggest the market
has warmed.
TENSIONS WITH JAPAN
Tensions continued to intensify in China’s
territorial dispute with Japan over the
Diaoyu/Senkaku Islands in the East
China Sea. Senior Chinese financial
leaders including central bank governor
Zhou Xiaochuan and Finance Minister
Xie Xuren cancelled trips to the IMF and
World Bank annual meetings held in
32%
Increase in China’s
average broadband speed
in the first half of 2012
Imaginechina
Tokyo in a seemingly retaliatory snub to
Japan. The dispute hurt state-run China
Eastern Airlines, which announced
an 18% month-on-month drop in
international passenger numbers in
September, due in part to lower Japan
sales. China and Japan announced they
would enter into formal talks with the
aim of easing tensions, though no date
was specified.
LAW & REGULATION
A US House Intelligence Committee said
attempts by Chinese telecom equipment
makers Huawei and ZTE to expand in the
US could threaten national security and
may have violated US law. The committee
urged US lawmakers to block the
companies’ mergers and acquisitions,
and suggested that US firms avoid using
Huawei or ZTE products. The Canadian
government also said it would bar Huawei
from taking part in large government
communications projects due to security
concerns. Huawei and ZTE have routinely
denied allowing the Chinese government
to use their equipment for surveillance.
ENERGY & COMMODITIES
Asia’s largest refiner Sinopec and
ENN Energy Holdings abandoned their
US$2.2 billion plan to acquire piped-gas
distributor China Gas, citing failure to
obtain government approval. CNOOC’s
proposed US$15.1 billion takeover
of Canadian energy company Nexen
suffered a setback when the Canadian
government extended a review of the deal
by 30 days.
Increase in first-half
profits of baijiu seller
Moutai, lower than
analyst expectations
43%
16%
Beijing traffic flow
made up by bicycles,
down from 30% in 2005
11
month in re view • global attitudes p roject
Second thoughts
More Chinese are worried about the ills of economic development than ever before,
the Pew Research Center’s new poll shows
S
But in contrast to the China of four years ago, respondents
today had more conflicted views about economic development.
Half of respondents described the gap between the rich and the
poor in China as a very big problem. Fewer people said they like
the pace of modern life than four years before. Nearly 60% said
the traditional Chinese way of life is getting lost, and 71% said it
should be protected from foreign influence.
Their comments also showed growing concern about China’s uneven playing field. While 45% agreed with the statement
“most people can succeed if they work hard,” one in three disagreed. Interestingly, views on this question had a direct correlation with views on whether the government should intervene to
help the poor.
ince Deng Xiaoping began knocking down China’s barriers with the world in the mid-1970s, economic development has been an unconditional goal. But as standards of
living rise, Chinese have become increasingly aware of the downsides of rapid development, especially growing social inequality.
Nowhere is this more evident than in the Pew Research Center’s
poll of China, which surveyed 3,177 Chinese this spring as part
of a 21-nation Global Attitudes Project.
The poll clearly shows China’s rapid economic development. Most Chinese (70%) reported being better off financially
than five years ago, a higher proportion than any other surveyed
country except Brazil, and three in four agreed that people are
better off in a free-market economy.
The world’s biggest increase in standard of living
The rich get richer while poor get poorer
0
2%
7%
20
40
60
80
100
120
Brazil
10
%
China
India
Mexico
US
Germany
36%
Egypt
45%
Greece
Japan
Spain
Completely agree
Mostly agree
Don’t know
Completely disagree
Mostly disagree
Significant doubts about economic fairness
Better off than five years ago
About the same
View on hard work and success affects views on capitalism
8%
Among those who say...
13
%
What's more important?
45%
33%
Most can succeed w/ hard work
Hard work no guarantee of
success
Difference
Individuals free to pursue life's goals
44%
31%
-13
Active gov't makes sure no one in need
48%
61%
13
Don't know
8%
9%
1
Most people better off in free market
Agree
87%
69%
-18
Most succeed if work hard
Hard work no guarantee
Disagree
11%
26%
15
Neither/both*
Don’t know
Don't know
2%
4%
2
Source: Pew Research Center Global Attitudes Project, 2012
*Voluntary response
china by numbers
2,270
Delegates elected to act
as representatives at
the 18th National Party
Congress
Foxconn quality inspectors
who refused to work after
reports of one inspector
being assaulted
100
Source: Yahoo News, Business Insider, Bloomberg, CNN, China Daily
12
Worse off
$1.2m
Prize money given to Mo
Yan, China’s first Nobel
Prize winner for literature
Reservations canceled on
All Nippon Airways’ China
routes from September to
November as a result of
Sino-Japanese tensions
40,000
Imaginechina
co mpanies • the busine ss of sport s
For love or money
In Chinese soccer, cash and optimism abound
B
arely over a year ago, China’s professional soccer league was virtually unknown outside of the country and looked upon with considerable
disdain by many of those within it.
Plagued by match-fixing scandals
and a perceived low quality of play, the
domestic league had struggled badly for
years. Its inadequacy was mirrored by
the national team. The Chinese team
qualified for the World Cup only once, in
2002, bowing out in the first round without scoring a goal. In short, Chinese soccer was going nowhere fast, and interest
in the game in China was minimal.
But a massive injection of cash into
the game has abruptly changed this. A
slew of top players from European and
South American clubs have joined teams
in the Chinese Super League (CSL).
14
It all started in June 2011, when
Guangzhou Evergrande signed Argentine Dario Conca from Brazilian team
Fluminense on a massive US$10 million-a-year deal, making him one of the
highest-paid players in the world. The
28-year-old midfielder had just won
the Brazilian league player of the year
two seasons in a row. No foreign player
of this caliber had ever played in China
before.
The signing did not attract much
attention from the soccer world as a
whole – Conca was a talent, but he had
never played outside South America –
but it did raise the bar for the caliber of
foreign players joining Chinese clubs.
Shanghai Shenhua was next to join
Chinese soccer’s financial revolution,
signing Nicolas Anelka, a high-profile
French forward from English Premier
League team Chelsea, for a staggering
US$300,000 per week. Then this June,
Shenhua captured a genuine world class
super star, Ivory Coast striker Didier
Drogba.
Suddenly Chinese clubs like Shanghai Shenhua and Guangzhou Evergrande
were on the back pages of European
newspapers, which had long completely
ignored the game in China except to
report on corruption or the lamentable
performances of the national team. Why
the sudden cash injection, they asked,
and why did optimism suddenly abound
in China?
Flush with cash
What most outlets failed to pick up on
was that domestic soccer in China had
com panies • the business of sports
already been on an upwards trajectory,
albeit a modest one, since the middle of
the last decade.
In 2005, average crowds for CSL
matches were around 10,000, but by 2011,
thanks to a concerted effort to eliminate
graft and improve quality of play, crowds
had increased to just under 18,000. This
figure is roughly the same as US Major
League Soccer or Japan’s J. League, two
competitions launched in the mid-90s
at the same time as Chinese professional
soccer.
An influx of investment showed that
businesses recognized this potential.
Nike signed a 10-year contract, reported
by various Chinese media sources to be
worth US$15 million a year, with the
CSL in 2010 to supply branded playing
kits for all clubs, while Adidas inked a
multi-million contract to provide kits for
the Chinese national team.
Toshiba sponsored the Chinese FA
Cup last year for an undisclosed amount,
while Chinese conglomerate Wanda
Group and tire multinational Pirelli have
sponsored the CSL. And last month,
US sports marketer IMG, which helped
launch Chinese professional football in
1994, announced its return with a new
10-year deal to promote the CSL.
It’s not only the big boys who can
benefit from the upsurge in the game.
Langston Smith, who with Oceans Marketing promoted Manchester United’s
exhibition match with Shanghai Shenhua in July, said he wouldn’t be surprised
if smaller sporting gear companies angle
for the commercial Chinese soccer market.
“Nike has the CSL on lockdown with
a great 10-year deal. However, the CSL’s
new money may help increase the soccer
market and smaller brands may position
themselves differently in order to take
some market share away from Nike/Adidas,” said the Beijing-based sports marketer.
It was partly on the back of this
upward investment trend that Evergrande Real Estate bought Guangzhou
Pharmaceutical FC in early 2010 for
around RMB100 million (US$15.98
million). Evergrande chairman Xu Jiayin,
one of China’s richest men, stated his aim
of making the team the champion of not
only China but also the Asian Champions League.
This massive investment saw the club
snap up much of the best talent China
has to offer alongside the aforementioned
Players in China,
including Drogba, are
now among the highestpaid in the world, even
though they play in a
league which is nowhere
near as well attended,
or as commercially
developed, as the top
European leagues
Conca and Barrios, helping Evergrande
to win the CSL at a canter last year.
Despite the influx of sponsorship
money, it’s clear to anyone taking even
a cursory glance over the CSL that the
sums just do not add up. Players in China,
including Drogba, are now among the
highest-paid in the world, even though
they play in a league which is nowhere
near as well attended, or as commercially
developed, as the top European leagues.
But the effectiveness of soccer teams as
advertising platforms means Chinese
companies and wealthy individuals are
still happy to invest in loss-making ventures.
And the new money coming into the
game isn’t being spent for soccer’s benefit only, cautioned Brandon Chemers,
managing editor of Chinese soccer news
website Wild East Football. Club owners
see investing in city soccer teams as a way
to curry favor with local governments and
build political connections.
“Massive real estate companies, profiting off the jumps in property prices,
have made a killing and certain individuals see soccer as a way to raise their profile. The same is true with the local and
provincial governments in certain situations,” he said.
Wild East Football’s Chemers agrees
the new money will lead to increased
business opportunities but warned that
soccer still has image problems in China.
The Chinese game is riddled with eccentricities which affect the marketability of
the sport.
For example, the final round of games
last season was played at 3 p.m. on a
Wednesday afternoon, when most fans
were working. The CSL never offered any
official explanation for the bizarre climax,
but it was thought the timing was an
anti-corruption measure.
Back to basics
What is required most of all to help Chinese football flourish into a mature sports
market is a new and sustainable approach
to grassroots football. Trevor Lamb, international projects coordinator and coach
at Hangzhou-based youth soccer club
Sinobal FC said the sport remains undervalued in China by both local authorities
and the public, and there is not enough
organization at the youth level.
“At football fields open to the public
you can sometimes see over a hundred
players playing in over 10 overlapping
small-sided matches simultaneously. It’s
complete chaos,” said Lamb, who puts
the problem down to a lack of space in
cities for public or commercially operated
fields.
“Most Chinese are still not willing to
spend lots of money on playing football,
or many other sports,” he said. “So while
some will spend thousands of renminbi
on a new iPhone, they won’t pay a couple
of hundred renminbi for a season of regular competitive football and proper gear
to play in.”
Many Chinese are also reluctant to
spend money on watching the sport, an
issue Lamb claims Chinese clubs are illprepared to tackle. “Chinese clubs have
little awareness of things like corporate
social responsibility projects [or having]
club officials, players and coaches interact with fans.” Chinese soccer also suffers
from the occasional sudden departure of
clubs from one city to another, disrupting efforts to build a team’s fan base and
culture.
The increasing excitement obscures
the fact that China’s love of soccer continues to be limited largely to foreign
teams. Big European clubs attract thousands of followers watching online and in
the stands when they tour in China. And
it’s mainly because of recent imports of
big-name, big-money foreign players that
this latest wave of interest in the game
has arisen.
Avid fans and players of the game in
China argue that the country needs to
channel this upsurge into increased participation at an amateur level. Only then
will Chinese learn to love their native
soccer players and teams a little more and
create the foundation on which a mature
and established football market can be
built.
15
local v oices • China’s overseas student s
Putting down roots
Overseas Chinese students weigh the opportunities
and risks of returning to the motherland
T
he highest goal for China’s elite students used to be gaining admission to Beijing’s prestigious Tsinghua University or Peking University. In more recent
years, however, the consensus seems to have shifted, with an increasing number
of students choosing to go overseas in search of world-class educations.
More than 300,000 Chinese students – disillusioned with the mainland’s exambased education system that smothers critical thinking – attended overseas universities
in pursuit of a higher degree last year.
Many of these students strive to gain a foothold working abroad after graduation,
but limited job opportunities send roughly 70% back to their homeland, according to
recruitment consultancy Zhilian Zhaopin. The Ministry of Education says the number
of “haigui,” or students returned from overseas, surged from 50,000 in 2008 to nearly
340,000 last year.
These students aren’t always quick to readjust. Many returning Chinese experience “reverse cultural shock” at institutional nepotism and lack of efficiency in Chinese
companies. China Economic Review spoke with several current and former overseas
students on what they learned about their home in their time overseas and why some
chose not to go back.
Mr Wu Yang, 27, engineer at Arup
in Beijing
In the US, the pressure to excel in order
to stay in the country often forces Chinese students to make choices against
their will. For example, if you want to
pursue an academic career, you may have
to suffer through topics that you may not
be truly interested in. I studied structural
engineering, an industry that is dying in
the US. There are many limits to what
If Chinese students
want to stay in a foreign
country, they have to be
flexible, regardless of
whether they believe in
what they’re doing
you can truly feel passionate about doing
when in a foreign country. If Chinese
students want to stay in a foreign country, they have to be flexible, regardless
of whether they believe in what they’re
doing. I know a Ph.D. candidate in physics who sold boxed meals part-time. He
couldn’t find a job after graduation, so he
pursued another master’s degree just so
he could stay in the US legally. He continued to sell boxed meals and probably
owns a restaurant now.
16
Ms Liu Xiaoqin, 26, medical specialist at China National Biotech Group
in Beijing
I returned to China immediately after
completing a two-year master’s degree
in the US, since I was homesick and my
boyfriend was in China. Job hunting
went well. First I worked at a US biotech
firm for one year and now am working
at a state-owned company. I realized
that I am more at ease with a Chinese
company environment. At the previous foreign company, I mostly compiled
data, which was tedious and less intellectually challenging. Since it’s a foreign
firm, they wouldn’t share core technologies with us. It made me feel like a cog in
Since it was a foreign
firm, they wouldn’t
share core technologies
with us. It made me
feel like a cog in a huge
machine
a huge machine. But at the state-owned
company I could leverage my experience
and was assigned greater responsibilities.
The only thing that bothered me when I
returned was that Chinese people ignore
traffic rules and blare their cars horns.
home free: Chinese students graduate from
Nanjing University of the Arts
Mr Chen Yifan, 27, owner of a real
estate agency in Sheffield, UK
In 2005, I came to the UK for a master’s
degree in materials chemistry and eventually got a doctorate in 2010. Most of
my peers went back to China for work,
because they thought it would be easier
to find a good job. I decided to stay in
It’s never easy to start
your own business, but
that’s especially true in a
foreign country
the UK for another five years in order to
obtain a permanent resident visa. After
graduating I looked for jobs related to
my major, but the results were frustrating. But I had helped a Chinese freshman who came to study to find a house at
one point, and this gave me an epiphany.
Some friends and I founded a real estate
firm that helps Chinese overseas students
rent houses in Sheffield. It’s never easy to
start your own business, but that’s especially true in a foreign country. In China,
the government and families often give
financial support to recent grads who
start businesses. However, as all the other
members of my family are still in China,
I have to be independent and overcome
problems on my own. I hope I can help
my family relocate to UK someday, when
I really belong to this nation.
local voices • China’s ov erseas students
Imaginechina
management last year. It wasn’t fruitful, so
after three months I returned to Shanghai.
It was largely due to my lack of working
experience in the UK. Substantial working experience is always more valuable
than a sheet of paper. I wouldn’t say I am
completely satisfied with my current salary, but I understand an overseas degree
doesn’t guarantee higher pay. Most of my
learning in the UK came from interacting with people from different countries.
In our college, Chinese were a minority. I
graduated as a more confident person in
general, and I was more aware of how to
work to benefit a team.
Mr Liu Sen, 26, social media executive at Razorfish in Shanghai
I worked hard searching for a job after
graduating from Warwick University (in
the UK) with a master’s degree in media
Mr Xu Xiaoming, 55, president of
Shanghai University of Science and
Engineering
Compared with the traditional Chinese system, higher education in western countries is more rigorous and the
academic atmosphere is more open.
These advantages are the key reason
that many Chinese students choose to
go abroad. This trend also benefits our
country: Returnees will bring good academic ideas, diverse cultural values and
advanced technologies back to China.
When I was one of the few overseas
students about 30 years ago in Germany, it was more difficult to integrate
ourselves. Nowadays, Chinese students
already have access to information about
the whole world through the internet. I
think they should take more advantage
Returnees bring good
academic ideas, diverse
cultural values and
advanced technologies
back to China
of this. Overseas returnees offer some
advantages to employers, including language ability and cultural understanding.
However, this often means they ask for
better wages and benefits. In fact, in the
early stages of their careers, the salary
differences between those who studied
in China and those who studied overseas are not that big. But as time goes on,
employers often recognize the strengths
of the overseas returnees.
17
Talking Points
bill dodson, p22
Can China dodge the looming
threat of climate change?
gabrielle coyne, p24
Penguin's Asia-Pacific CEO
discusses trends in publishing
Imaginechina
chinese whispers, P20
A review of novelist Yu Hua's
'China in Ten Words'
Postcard from Tokyo
The view from the IMF and World Bank meetings in Tokyo shows the global economy is at
the mercy of politics, writes Frederic Neumann
T
he world is adrift. That is the conclusion of this economist, who
got to sip buckets of green tea
with officials and investors at the annual
meetings of the IMF and World Bank in
Japan these last few days.
The mood, unsurprisingly, was somber. The IMF’s recent downgrades of its
growth forecasts, merely acknowledging
reality, didn't help. More worrying were
the deep disagreements about the appropriate policy response.
Above all, the world is seemingly
devoid of political leadership at the
moment. Over the next three months, it
is not data, but politics that will decide
18
whether the global economy is make or
break in 2013.
By the numbers
We drew several conclusions from the
annual meetings. First, fiscal policy is
broken. The mess in Europe is obvious,
but delegates, rightly, were equally worried about the lack of fiscal clarity in the
US. Even if a last-minute compromise
can blunt the impact of the looming fiscal cliff, the drag from the public sector in
the US might be bigger next year than in
the euro zone.
But the West is not alone. In China,
it is not yet clear what the government's
response will be to the current downturn.
Fiscal policy, as our chief China economist, Qu Hongbin, has noted, will be
decisive in stabilizing growth. But, apart
from a trickle of project approvals in
recent weeks, there is no apparent roadmap of how the country will pull its fiscal
levers in the coming quarters.
Meanwhile, in Japan, political gridlock has so far prevented the passage of
legislation to finance the ongoing budget.
The government is still confident it will
obtain a last minute passage, enabling it
to stick to its budget plans. But it already
had to postpone disbursement of tax
grants to local governments to preserve
talking points • freder ic neu mann
cash.
Second, plenty of controversy surrounds the appropriate path towards fiscal consolidation. In its World Economic
Outlook report – heatedly debated at the
meetings – the IMF concluded that fiscal multipliers are larger than hitherto
assumed. Up to now, the rule of thumb
had been that a 1 percentage point change
in a country's structural budget balance
would change growth by 0.5 percentage
points. The latest report suggests that the
effect could be much larger, around 0.91.7 percentage points. In other words,
fiscal retrenchment cuts growth by more
than anticipated.
The findings were seized upon by
opponents to austerity. IMF Managing
Director Christine Lagarde and German
Finance Minister Wolfgang Schaeuble
discussed the topic publicly (though in a
perhaps more civil manner than portrayed
by the international media). Lagarde took
a more lenient approach to the issue,
pointing to the desirability of pacing fiscal
retrenchment to avoid harming growth,
while Schaeuble insisted on adherence to
a strict timetable. The issue isn't resolved.
Third, politics is now the main risk.
While global growth may have started
to stabilize at a below-trend pace, worries
persist that policy uncertainty and indecision could make matters worse. The fiscal cliff will presumably not be addressed
until after the US presidential and congressional elections on November 6, leaving precious little time to avert a growth
shock in the first quarter.
A crucial EU summit was held on
October 18-19. The agenda was hugely
ambitious, including discussions over
banking supervision, legacy debt treatment, steps towards fiscal integration and
the growth compact. Substantive progress
might be hard to achieve with still widely
divergent objectives among member
states.
And again, it's not just the West
that's fumbling along. In China, the
Communist Party will hold its congress
on November 8. However, this will not
complete the transition process, which
will last until March 2013 when the top
government posts change hands. Markets
appear hopeful that greater clarity about
China's reform process and, in tandem,
the intended stimulus measures, will
arrive shortly after the party congress. But
it may take a little longer for the fog to lift
and visibility to improve.
Politics in Japan is stuck as well. The
Growth may have
started to stabilize,
but it is too fragile
to withstand policy
missteps in the world's
leading economies
government appears ready to call an election in the coming months, suggesting
that major policy changes will be put off
for quite some time, including additional
fiscal support for the economy. What's
more, polls currently indicate that the
incoming government, likely led by the
opposition Liberal Democratic Party,
may not command a large enough majority to adopt decisive reforms.
The fourth quarter, in short, is all
about political risk. Growth may have
started to stabilize, but it is too fragile to
withstand policy missteps in the world's
leading economies. For what it's worth,
we still think that China at least will start
to fire up again early next year. But that
assumes that the political transition proceeds smoothly and important decisions
aren't delayed.
In addition, we think that investors
still underestimate the impact of renewed
monetary easing on emerging markets.
The money train has left the station and
emerging market assets are the next stop.
Curiously, few people in Tokyo talked
about the damage that waves of easy
liquidity can ultimately do to financial
stability in parts of Asia.
Perhaps it's too early to talk about this.
But, if politics in the next few months
doesn't derail the global economy altogether, we suspect that at an annual meeting in the not-too-distant future that is
precisely the topic that will need to be
discussed.
Frederic
Neumann
is co-head
of Asian
Economics
at HSBC
Global
Research
19
book review • china in ten wor ds
Chinese whispers
have developed through past decades, in the process revealing forgotten contours of China’s recent
history.
Novelist Yu Hua’s history of 10 words in China
is a revealing and deeply personal portrait of a
complex country
C
China in Ten Words
Yu Hua
Pantheon, 240 pages
US$25.95
20
hina’s
history
over the last
50 years often
appears fractured and
disjointed beyond repair.
Few if any continuities
are apparent between
the barefoot doctors and
big character posters of
the Cultural Revolution,
and the gleaming skyscrapers and profusion
of knock-off products
today. Most of the time,
Chinese simply gloss
over their thorny past,
preferring to focus on
the material wealth of
the present.
This willful forgetting of China’s recent
past has given birth to
several dissimilar offspring. It has resulted
in the idea that China
has no unifying value
system, beyond getting
rich. It has also given
rise to pockets of revolutionary nostalgia – such as
former Chongqing Party Secretary Bo Xilai’s campaign to revive Cultural Revolution songs – that
jar with modern reality.
Yet certain qualities must have endured
between centrally planned Communism and
capitalism with Chinese characteristics, for the
simple reason that some Chinese people have lived
through, and sometimes thrived, through both. Yu
Hua, the celebrated author of novels including “To
Live” and “Brothers,” is one such person. In “China
in Ten Words,” his first non-fiction work, Yu draws
heavily on personal experiences to knit together
China’s ruptured history.
Part memoir and part linguistic history, the
book centers around 10 iconic terms in modern
China: people, leader, reading, writing, Lu Xun,
revolution, disparity, grassroots, copycat and bamboozle. “This tiny lexicon gives me ten pairs of eyes
with which to scan the contemporary Chinese
scene from different vantage points,” Yu writes.
The book maps how the meanings of these words
Green shoots
As a novelist, Yu has a natural advantage in capturing the specific. The book is organized like a
series of musical movements, each with soloists
and small groups playing renditions on a theme.
In China, this tactic would seem likely to result
in cacophony, but Yu’s narrative device of the 10
words keeps the storyline simple and focused.
The 10 words are more than just commonly
used terms; many are central to Chinese identity.
“People,” or renmin, for example, arguably has a
broader significance in Chinese than in English.
The same word used in “People’s Republic of
China,” “People’s Square,” and renminbi (“the people’s money”), renmin used to be a weighty phrase.
But since China’s reform and opening, “the people”
has fractured into many different identities: netizens, stock traders, fund holders, migrant laborers
and so on, Yu writes. “‘The people’ has become
nothing more than a shell company, utilized by
different eras to position different products in the
marketplace.”
The discussion of renmin, which leads the book,
revolves around the pro-democracy rallies in Beijing in the spring of 1989, where Yu's experiences
taught him “the real meaning of ‘the people.’” To
the author, the meaning of “the people” is not the
state-down organization that has occupied its
name, but the mass of individuals that sometimes
stands in opposition to it.
This theme echoes throughout the book. The
more modern terms, including “grassroots,” “copycat” and “bamboozle,” similarly emphasize the
ingenuity and chaos of democratic forces that have
sprouted up through the cracks in a repressive
political environment.
In Yu’s eyes, China’s “copycat” (shanzhai) creations, like Blockberry phones, Nibe shoes and
fake degree programs, represent the grassroots
challenging the elite, the popular challenging
the official and the weak challenging the strong.
He paints the “grassroots” element – the disadvantaged multitude that are not always welcome
in the societal establishment – as one of China’s
greatest strengths.
For example, much of China’s current wealth
has been created by grassroots entrepreneurs
exploiting opportunities that no one else would be
willing to. Examples abound of Chinese who have
grown rich on empires of trash recycling and button manufacturing. “China’s economic miracle of
the past thirty years, it’s fair to say, is an agglomeration of countless individual miracles created at the
grassroots level,” Yu writes.
Here again, Yu traces a fascinating and often
overlooked connection with China’s revolutionary past. The Cultural Revolution also cultivated a
Imaginechina
adaptation: Yu Hua, center, speaks at a press
event for the film adaption of his book "To Live"
The book presents
the ability to survive
through uncertainty as a
defining strength of the
Chinese people
grassroots element by inducing people in
the social underbelly to “throw caution to
the winds, and in a revolution where ‘to
rebel was justified’ they gained opportunities to soar.”
While China today is drastically different, Yu argues it is as much engaged in
a mass revolutionary movement today as
it was decades ago. The arrival of capitalism has spawned incidents reminiscent
of the Great Leap Forward, for example
provincial governments eagerly consuming their resources in a quest to report
ever-higher GDP figures. Development
also contains echoes of the revolutionary upheavals of the Cultural Revolution
that tore apart communities by inverting
existing social structures, elevating some
members of China’s grassroots contingent and ruining others.
Many early beneficiaries of the Cultural Revolution were cut down just as
fast as they had risen by shifting power
and the vagaries of its enforcement. “In
that era, destiny did not rest in one’s own
hands; everyone found himself swept
along in the current, and nobody knew
whether fortune or fiasco lay ahead.” This
trend continues today, with many wealthy
Chinese doing their best to avoid appearing on “rich lists” for fear of becoming
targets of government inquisitions.
The book presents the ability to survive through this uncertainty as a defining strength of the Chinese people. Yu
quotes Mencius in saying that “adversity
has a way of enhancing our existence,
while ease and comfort tend to hasten
our demise.”
Body politic
The book is more loosely organized and
impressionistic than most nonfiction
works about China, and it has few statistics designed to stun foreign business
partners. But for readers seeking more
color and context about China’s recent
history, “China in Ten Words” is a worthwhile read.
Yu’s account is deeply and self-consciously personal. Many of the 10 sections revolve around fascinating stories
from Yu’s childhood in the Cultural Revolution, a bloody period that foreigners
remain intensely curious about and many
Chinese would rather not discuss.
Several of Yu’s novels address violence, and this book is no different. In
one section, for example, Yu describes the
experience of watching public executions
as a child and later a vivid nightmare of
his own execution he had in the last days
of 1989.
He also intimates the psychological
pain of coming of age during the Cultural
Revolution. The familiar guilt and misconceptions of childhood occur in a landscape that is status quo to the author as a
boy but utterly bizarre to a foreign reader.
For example, he recounts the anxiety he
felt over not knowing what to report as
his own revisionist actions during selfcriticism sessions and his childlike pride
in the big character posters he authored.
During that period of inverted values,
bullying and mischief masqueraded as
revolution, and Yu was sometimes heartily commended for criticizing his teachers.
As a doctor, he often employs metaphors of illness and the body. Yu sees pain
and empathy as defining characteristics
of the Chinese experience. “Nothing in
the world, perhaps, is so likely to forge
a connection between people as pain,
because the connection that comes from
that source comes from deep in the heart.
So when in this book I write of China’s
pain, I am registering my own pain too,
because China’s pain is mine.”
Yu clearly believes in the power of
personal stories to convey truth. In this
book, they do: “China in Ten Words”
instills the reader with a deeper and more
emotional understanding of China’s
recent history. The book’s value is that it
resurrects this troubled past and knits it
together with the present, in the process
shedding light on China today.
“If literature truly possesses a mysterious power, I think perhaps it is precisely
this,” he writes, “that one can read a book
by a writer of a different time, a different
country, a different race, a different language, and a different culture and there
encounter a sensation that is one’s very
own.”
21
talking points • Bill Dodson
Hot seat
When it comes
to forestalling
climate
change,
gradualism is
a luxury China
cannot afford,
writes Bill
Dodson
Bill Dodson is the
author of “China
Fast Forward: The
Technologies, Green
Industries and
Innovations Driving
the Mainland’s
Future”
22
C
hina stopped “crossing the river by feeling the stones” and took the plunge into
modernization when it entered the WTO
in 2001. The rapid development of a country housing nearly 20% of humanity over the past three
decades has precipitated the tipping point for climate change. China officially became the factory
to the world in the last decade, and it surpassed the
US as the world’s largest carbon emitter in 2007.
Many of these emissions were still tied to US
development. Between 7% and 14% of carbon
emissions produced during China’s export boom
were actually made manufacturing products for
American consumers, Wen Jiajun, the China
project fellow at the International Forum on
Globalization in 2009, wrote in a report. Nearly
one-quarter of China’s carbon emissions during
these good old days could be attributed to exports,
according to Wen.
Now, with China gradually rebalancing its
economy from export-led factories and grand
infrastructure projects to consumption, the country’s energy needs are poised for another great
leap. If ever there was a time for China to impress
the world with its new wealth and make history
instead of just repeating it, it is this decade.
Unfortunately, China’s current targets and
policies for reducing and mitigating carbon dioxide emissions are tepid at best, brinksmanship at
worst. To stabilize global climate change, China
must implement more ambitious plans and targets
than are on its drawing boards now.
Hungry dragon
China’s energy consumption has grown at an
unsustainable pace. From 1980 to 1990, total
energy use increased about 60%. From 1990 to
2000 it expanded another 50%, and from 2000
to 2010 it grew by 130% to top 1,000 gigawatts
(GW) of annual consumption. Beijing expects the
country’s consumption to double again by 2020.
Despite China’s momentum in developing
renewable energy sources that will make up nearly
16% of the country’s energy generation portfolio
by 2020, coal will still contribute the lion’s share
of overall power. In 2010, China represented more
than half the world’s appetite for coal, and it is projected to burn 35% more coal in 2020 than in 2010
to meet its energy needs. Overall, the use of coal
and other fossil fuel in China will rise by over 40%
by the end of the decade if left unchecked.
Admittedly, Beijing is actively implementing
programs to boost energy efficiency and reduce
its emissions intensity, or carbon put out per unit
of GDP. The government aims to reduce carbon
emissions per unit of GDP by 17% during the
12th Five-Year Plan (2011-2015), and by 40-45%
the thick of it: China may under-report its carbon
emissions by as much as the total yearly output of Japan
from 2005 levels by 2020. The country has plans to
impose an energy cap of 4.2 billion tons of coalequivalent by 2015, and it has drafted a climate
change law that features a national emissionstrading scheme and carbon tax.
However, these announcements fall far short
of what needs to be done to reverse the effects of
rampant carbon emissions. Furthermore, meeting
even token annual goals in energy efficiency has
been problematic. In 2011, for instance, China cut
its energy used per unit of GDP by only 2%, rather
than the projected 3.5%.
Hot under the collar
Given the likely shortfall in limiting emissions, a
study by the Massachusetts Institute of Technology projects that China’s growing energy requirements will on balance contribute to an increase
in global temperature of about 0.1 degrees Celsius by 2020. The earth’s surface temperature has
already risen by 0.8 C since the late 1800s, when
the industrial revolution replaced wood with coal
as the engine of globalization.
The UN Framework Convention on Climate
Change – of which China is a signatory – identified a 2 C increase as the threshold beyond which
climate change will become self-sustaining. The
last time the earth saw a comparable rise in temperature was during the last interglacial period,
125,000 years ago, when sea levels were six to
nine meters above what they are today, inundating
now-populated islands and coastal regions.
Without substantive efforts on the part of all
industrialized countries to reduce carbon emissions, global average surface temperature will
increase by about 5.5 C during this century,
according to the MIT study.
Stabilizing warming to a livable 1 C point
would require all industrialized countries to apply
a greenhouse gas tax that would increase at 4%
per year. All coal-fired power generation processes
would need to implement carbon capture and
storage technologies. Natural gas and electric vehi-
Imaginechina
talking points • Bill D odso n
cles would play a major role in stabilizing
temperature rises. And alternative energy
technologies would need to dominate on
a scale that dwarfs current imaginings.
Blind spots
If China does not contribute to a robust
global effort at remediation, simulations
show global temperatures more than
doubling before the end of the century
to breach the 2 C red line. China, in
other words, is crucial in holding the line
against the earth’s next great climate reset.
But implementing this great policy
leap forward will require overcoming
significant barriers. First, frequent gaffes
on data collection are already weighing heavily on computer models used to
predict the rate and impact of climate
change. The authors of a study in the
journal Nature Climate Change argue
that Chinese under-reporting of annual
carbon emissions data may be as much
as the total yearly output of Japan, the
world’s fifth-largest emissions contributor. Statistical opacity also threatens to
render carbon-trading bourses in China
mere money-transfer schemes.
An even greater barrier to effective
remediation efforts involves a counterproductive worldview that imperils serious climate change initiatives, even on
an international level. “I have spent a fair
amount of time trying to convince my
Chinese friends that climate change is a
real threat instead of another conspiracy
by the rich countries to stop the economic growth of the developing countries,” writes Wen Jiajun. Modernizing
China still retains a sense of being his-
tory’s greatest victim.
Finally, it is difficult to tell which of
China’s environmental targets are actionable policies and which merely stem from
point-scoring in the back rooms of international climate change conferences. For
instance, the country’s climate change
law may not be ratified for another three
years, while a nationwide trading platform will likely not be implemented until
the latter half of the decade. Analysts see
the proffered carbon tax as being so low
as to be inconsequential.
Unfortunately, China does not have
the luxury of “feeling the stones” toward
mitigating climate change. Now, with
the world fast approaching the 2 C red
line, it’s time for the country to take a real
leadership role and transform its society
and economy to ensure its survival.
Counter-intuitively, the most effective way to spur the other great polluters
of the world into action is through China
creating a “Sputnik moment” by launching its own dramatic climate stabilization
actions. Ultimately, either we all take the
initiative to retrofit modern society for
sustainability, or the earth will do it for
us.
23
Talking P oints • PEN GUIN BOOKS
March of the penguin
Penguin AsiaPacific CEO
Gabrielle
Coyne
discusses
the digital
technologies
and
international
influences that
are reshaping
the Chinese
publishing
industry
F
or decades after China’s economy began to
open to the world, the only English books to
be had in the country were the smattering of
classics that sat largely untouched on the shelves
of the Xinhua state bookstore. But in the last five
years, English titles on the mainland have proliferated. This is in part due to the entry of big foreign
publishers to the market, who partner with local
publishers to release English books, Chinese titles
and translations of both. In 2011, 7.7 billion books
were published in China, making it the largest in
the world by volume.
Global publisher Penguin Books has seen
China become one of its most important emerging markets since it first established a presence on
the mainland in 2005, with sales growing by 120%
just last year. China Economic Review spoke
with Gabrielle Coyne, CEO of Penguin Group
Asia Pacific, on China’s literary appetite and the
uncertain course of its publishing industry.
What trends have you seen in the Chinese market in the last few years?
We’re now in our seventh year [in China]. One
of the things we've been mindful of right
from day one is what sort of presence we
wanted to have in China. It's really about
developing the right publishing partnerships. Each time I come, there are new
Chinese publishers that we're working
with. It’s absolutely about matching
the right book or idea with the right
local Chinese publisher.
How does the Chinese publishing
industry differ from other countries?
There is a sense that this is a
real moment for the survival
of publishing in China. I
don't feel like that's [the
case] in Australia, the
US or the UK. Penguin
regards itself as both
traditional and digital,
and we don’t see digital as a threat. It's just
about how we develop
digital capabilities so
that people can read
where they want to
read – be it tablet or
mobile phone or any
e-reader device. But
there seems to be so
much uncertainty
about digital in
China. The second
24
There is a sense that this is a
real moment for the survival
of publishing in China
observation that I'd make is that three years ago
we felt less confident that the best possible regimes
were in place in China to protect the copyright of
the author. We talk very openly with [General
Administration for Press and Publication] and the
minister about our concerns. The copyright regime
is now in place, and I certainly feel more confident about the progression into digital, now that
we have assurances that the rights of the author
will be protected.
How does the battle with digital piracy in China
compare to other markets?
That is a concern, certainly. We've spent quite a
bit of time assessing digital piracy. When we first
started the monitoring process about 18 months
ago the figures were pretty staggering, especially if
you're an American or British or Australian publisher who does not have a market where piracy
of physical books is a concern, like in China or
India. But digital piracy is not growing here and
there's a real understanding that the consumer is
prepared to pay, and they understand the rights of
others broadly speaking. I don't think [piracy] will
ever be completely eliminated from markets such
as China. But it’s heartening that the government
understands the importance of it.
It seems like foreign books have more difficulty
breaking into the China market than other types
of media, like foreign movies or TV shows. Is
that your experience? What type of foreign book
is most successful here?
It's always risky to become too scientific about
the art of publishing. Every day publishers release
books on their sense and their editorial understanding that a book will find a reader – and sometimes we're right and sometimes we're sadly very
wrong. I don't think that’s different anywhere in
the world. Since we've been in China, the market
for foreign books and Chinese language books has
been a young market. When we first started, 80%
of the books we were selling were to foreigners,
and 20% we were selling to Chinese. That now has
virtually flipped. So I think that tells us something
about the English language and young, Chinese
urban readers.
Are most of the books you're selling here in English and a minority in Chinese?
talking points • ga br ielle coyne
With the Chinese [books], we've been working with local publishers, so those are their books to sell. That's a hard one to get
the exact answer on, we need to extract the sales information
from our partners. And I'm not saying they're not willing, it's
just a lot of gathering of data. We don't have that many books
in the Chinese language, [compared to] the sheer number of
titles that we have in the English language that come to China
[through] importers. But that's just the number of titles; it's not
a measure of readership.
It's always risky to become too
scientific about the art of publishing
What are your expectations for Penguin’s future in Asia?
Penguin has established markets – the US, UK, Australia, New
Zealand, South Africa – and we're continuing to invest in those
markets. And then we're really focusing on emerging markets –
China, Brazil and India, where we’ve been for 25 years. We've
been [in China] for seven years and we'll continue to work
closely with publishing partners to bring books into Mandarin.
I think now is the hardest time ever to think about trends in
publishing. History has always been a fantastic record for publishers, but with things changing, and changing so rapidly, it's
difficult to use history as a guide. This is the time we're least
able to speak in absolutes. But I certainly see that our commitment and our work in China, Brazil and India and Korea are
very important – because they are markets that will continue to
emerge, and emerge fast.
Have you seen books about China become more popular
overseas in the last few years?
The first book that Penguin signed was Wolf Totem, when we
first started our China operation in 2005. That of course went on
to win the Man Asian prize and was sold in Australia, the UK
[and] America. We are in the business of identifying the best
books possible by the best writers possible, and when thinking
about international markets, [we want to ensure] that the books
will speak to both markets. We've just published in the English
language Northern Girls and The Civil Servant's Notebook.
What are some of your favorite China books or titles you’re
looking forward to?
Northern Girls, Sheng Keyi's book, or Paul French’s Midnight in
Peking. I love that book and I love the story behind the book.
We'll be publishing a book by John Garnaut, who is a foreign
correspondent in Beijing, a short digital book about the Neil
Heywood [murder] case. It's a case which is so fantastically
Shakespearean in many ways.
We have been curious when the Bo Xilai affair would appear
in a book, because it has kept evolving. So perhaps everybody
is waiting to publish the thick volumes.
That's why we approached John, because this is the great thing
about digital as well – you have it all planned out for when you
do the full book. The digital e-book gives you the opportunity to
do a quick piece that describes what’s going on without it having
come to a final conclusion.
25
talking points • l.e.k. consulting
Moving money and drugs
Regulations
and capital
injections
are changing
the face of
pharmaceutical
distribution
in China,
write Stephen
Sunderland
and Helen
Chen of L.E.K.
Consulting
Stephen Sunderland
is a director and
partner of global
strategy firm L.E.K.
Consulting based
in Shanghai. Helen
Chen is a director,
partner and head of
China life sciences
26
I
t seems that every other week another acquisition or alliance is announced in China’s pharmaceutical distribution sector. Sinopharm,
the largest player in the industry, announced in
June 2012 that it would issue up to RMB8 billion (US$1.3 billion) of debt to fund expansion
opportunities, just three years after its IPO raised
US$1.13 billion. In the same month and in a similar vein, Cardinal Health China acquired Zhejiang
Dasheng Medic to deliver better coverage in the
Ningbo area.
International interest in the sector is also evident. Alliance Boots recently announced it would
take a 12% stake in a major Chinese pharmaceutical distributor, Nanjing Pharmaceuticals, adding
to its long-standing joint venture with Guangzhou
Pharmaceuticals Group.
The big squeeze
Pharmaceutical distributors are a critical part of
health care in China, ensuring that hospitals and
pharmacies and thus patients have access to the
drugs developed and manufactured by pharmaceutical companies. The role of distributors extends
well beyond logistics and inventory management
to encompass areas as diverse as financing and
sales support. As a result, pharmaceutical distributors collectively generate more than US$139 billion in revenue in China annually.
However, the industry remains underdeveloped. It is highly fragmented with more than
13,000 registered pharmaceutical distributors now
operating in the country. The top 10 distributors
now represent 54% of the market, substantially
more diffuse than the US where the top three
players control more than 95% of the market.
Unsurprisingly, the industry is undergoing
massive and rapid consolidation. National and
regional champions are emerging, mainly through
mergers and acquisitions.
For example, Sinopharm and Shanghai Pharmaceuticals, the two largest distributors, made
acquisitions worth RMB7 billion in 2010, gobbling up an additional 6% of combined market
share. Companies are also increasingly expanding
into related businesses, such as supply chain services, retail pharmacies and drug manufacturing.
Chinese regulators are clearly pressuring the
industry to consolidate, in part due to concerns
that the distribution channel is capturing much of
the profit and passing on outsized health care costs
to taxpayers and patients.
Government agencies have issued a litany of
regulation to encourage the industry’s consolidation, including an explicit target for consolidation
in the 12th Five-Year Plan. The top 100 distributors were to grow from 70% of the market in 2010
to 85% of the market by 2015, while up to three
national giants and up to 20 regional leaders would
be created. As part of the 2009 health care reforms,
regulators also designated an Essential Drug
List (EDL) to reduce the cost of key medicines
for patients by capping hospital and pharmacy
mark-ups and enhancing the level of competition
between drug suppliers. The number of drugs on
the EDL has been expanded further in 2012.
The government also altered the tendering
process in 2010 so that provinces, rather than individual hospitals, take charge of bidding for pharmaceutical drugs, a change which favors larger
distributors. Finally, it increased direct regulation
and raised barriers to participation in the market
by creating minimum standards with which market participants need to comply.
Regulators have also proposed, but not yet
begun to widely enforce, a series of measures
with the potential to drive radical restructuring
of China’s prescription drug industry. The government may directly limit the mark-ups allowable
on manufacturer prices, implement a “two invoice”
policy to improve industry transparency and counteract graft, or forcibly separate the dispensing of
medicines and writing of prescriptions.
There are no signs that the regulatory and
commercial pressures that are driving consolidation in the sector will let up anytime soon. The distribution market is far from consolidated by global
standards, and health care costs remain a public
and political concern.
The right target
What constitutes a good investment for these distributors as they expand? First, the asset needs to
be large enough to be worthwhile. Transactions
and post-acquisition integration may distract
management teams and exact a real cost, and it’s
always possible that the distributor’s investment
could be better used to grow organically.
Investors also appear to do better in targeting depth rather than scattered breadth. Regional
concentrations often give a company resilience and
strategic options that they would not have using
a scattergun approach which delivers national or
multiregional reach.
Finally, distributors must seek out good quality
relationships with major end-customers. Seeing
the asset through the customers’ eyes is critical to
understanding its future prospects and risks. It also
reduces risk to the organization by ensuring that
these most important relationships are reinforced
at the corporate level, rather than devolved to individual salespeople.
There are firms in the market still with these
good characteristics, but acquiring reliable infor-
talking points • L.E.K . Consulting
Through regulation
and competition,
the pharmaceutical
distribution industry as
a whole is being forced
toward lower profit
margins
mation on provincial and sub-provincial
market dynamics is still challenging in an
industry that has traditionally been characterized by a lack of transparency. Companies should proceed, but with caution.
Weighing the odds
The rapid changes in the structure of
the pharmaceutical distribution industry
will continue to have ramifications both
inside and outside the sector.
Through regulation and competition,
the pharmaceutical distribution industry
as a whole is being forced toward lower
profit margins. While the strategic winners are likely to continue to deliver good
returns reflecting the industry’s strong
underlying growth, others will struggle or
be forced to exit outright. Rapid consolidation, both organic and inorganic, will
continue to be a feature of the industry
as margins shrink in years to come. The
flipside of this is that companies will see
big opportunities for improving the efficiency and transparency of their distribution channels.
Pharmaceutical companies seeking to
distribute their products in China have
historically focused on market reach. In
the future, as the China market becomes
easier to address, reach will become less of
a differentiator.
In this environment, the competencies that major international distribution players can bring to bear from more
developed markets will become more
highly valued, and domestic distributors
will need to invest significantly to replicate this expertise.
The optimal “next generation” business model in pharmaceutical distribution for China remains far from clear, as
is the path to achieving it. But undoubtedly there will be big winners, and losers,
in finding the way forward.
Sales share of top 100 pharmaceutical
distributors in China
100
30%
27%
Rest of
market*
15%
80
60
27%
#11-100
32%
40
15%
#4-10
85%
14%
20
24%
0
2010
31%
2011
#1-3
2015
target
MOFCOM
Source: MOFCOM, L.E.K. analysis
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27
Special report:
CREDIT: James B Currie
China in the US election
Tough on China
Obama and Romney are pledging to crack down on China’s purported economic
crimes. Will that really benefit the US?
“
Fewer Americans are working today
than when President Obama took
office. It doesn’t have to be this way
if Obama would stand up to China,” a
man’s voice says as the camera pans past
broken warehouse windows.
With vague language and stark
imagery, the 30-second campaign ad for
Republican presidential candidate Mitt
Romney conflates America’s economic
stagnation with Obama’s failure to “stand
28
up” to devious Chinese practices. “Seven
times Obama could have taken action,”
the ad says, referring to the US Treasury
Department’s semi-annual review of currency practices. “Seven times he has said
no. His policies cost us 2 million jobs.”
Obama has fired back with his own
campaign ads charging that private
equity firm Bain Capital shipped jobs off
to China under Romney’s direction. Both
candidates claim that China’s unfair tac-
tics have damaged US businesses, lifted
unemployment and helped to boost the
US trade gap with China to a record
US$295.5 billion in goods in 2011.
Listening to this rhetoric, it seems
that the continued fallout from the financial crisis has rung in a new era of economic conflict. China’s currency continues to be a subject of debate. The Obama
Administration has brought more major
trade actions against China in the WTO
special report
china in the US election
than any previous administration, launching complaints over auto parts, solar cells,
credit cards, chickens, rare earths and
even kitchen sinks.
However, a closer look shows that
punitive actions by the US against China
are not nearly as wide-ranging or as beneficial as the candidates purport them to
be. Furthermore, their bombastic claims
may be putting the world’s most important bilateral relationship at risk.
“US-China relations are very troubled, for reasons that partly have to do
with the economy and partly have to do
with security,” said Tom Wales, deputy
director of analysis for Oxford Analytica,
a global advisory firm. “As long as things
remain economically tough in both countries, you’re going to have this kind of
friction.”
Tit-for-tat
The flurry of trade complaints the Obama
Administration has launched against
China are not without merit. “It rather
depends on the company and the industry, but in general, Chinese companies
do get much more significant subsidies,
direct and indirect, than US companies
receive,” Wales said.
The US also subsidizes its businesses,
of course, but it does so mostly in line
with WTO rules – for example, offering
income tax breaks for people or companies that buy domestic solar products,
rather than offering its solar companies
direct subsidies like soft loans and grants.
Lower-income countries like China
have more difficulty following WTO
regulations, since the rules were written
by and for high-income countries, said
Yukon Huang, a senior associate at the
Carnegie Asia Program and a former
World Bank country director for China.
For example, China has trouble subsidizing its solar industry through tax breaks
because many Chinese underreport or do
not pay income tax. Of course, as a WTO
member, China must still follow the rules
or pay the penalty, Huang added.
But while trade cases against China
may be valid, they are unlikely to do
much to revive the US economy. Take the
Obama Administration’s latest measure:
Obama announced in late September
in Ohio, a swing state and a major auto
parts producer, that the US would bring
a WTO case against China for providing
US$1 billion in illegal subsidies to auto
parts exporters between 2009 and 2011.
The US auto parts sector has suffered
in recent years; employment in the sector
fell roughly 50% between 2001 and 2010.
But that’s more likely due to massive
increases in productivity in the industry
than foreign competition, said Wales of
Oxford Analytica.
China is not even the major source of
competition for the US auto parts industry. China’s share of the US import market rose from 1.6% to 9.3% between 2001
and 2010, according to Oxford Analytica,
but the country continues to lag behind
Japan, Canada, Mexico and Germany as
a supplier of auto parts to the US. And
rapidly rising wages within China mean
that its auto parts factories are becoming
less competitive.
By some measures, the
US-China relationship is
not even America’s most
embattled
“[Obama’s] action, particularly its
timing, is 100% politically motivated,
[and] it’s just a very small gesture,” said
Ian Fletcher, senior economist at the
non-partisan Coalition for a Prosperous
America. “The US has been firing more
complaints recently, but the thing that
people tend not to understand is that
these specific complaints are a very small
part of the overall trading relationships.”
By some measures, the US-China
relationship is not even America’s most
embattled. As a proportion of total trade
volume, disputed cases between the US
and China are much smaller than those
between Canada and the US or India and
the US, said Li Chunding, an assistant
researcher at the Chinese Academy of
Social Science’s Institute of World Economics and Politics.
Money talks
Another source of popular misconceptions is the rhetoric surrounding China’s
currency. While many Chinese now argue
the renminbi is close to its real value, critics (many in the US) charge that China
still undervalues its currency by as much
as 20-30% to subsidize its exports and
raise the cost of imports.
Romney criticizes Obama for failing
to right this perceived wrong, and he has
pledged to label China a currency manipulator “on day one” of his presidency. He
is not alone: Democrat Chuck Schumer
led the Senate in passing a bill that would
impose an across-the-board tariff on any
country that is labeled a currency manipulator, though the bill was later voted
down in the House of Representatives.
But it’s far from clear that China
deserves to be singled out as a currency
manipulator. The country does control
the value of its currency, allowing it to
fluctuate within a narrowly set band, but
analysts say China is by no means the
only offender, and perhaps not even the
most egregious.
Most countries manage their
exchange rates, often by tying their currency to the value of the US dollar as
China has, said Huang of Carnegie. “The
Hong Kong dollar has been HK$7.80 to
the US dollar for a hundred years. They’ve
never changed their exchange rate, but
has anyone ever labeled them a currency
manipulator? No.”
Kenneth Lieberthal, the director of
the John L. Thornton China Center at
the Brookings Institution, calls the currency manipulator label “gratuitous” (see
full interview on page 31). The label
would primarily trigger a series of negotiations with China, and “we’ve done that
every day with China for years. So this
is a distinction without a difference.” The
main purpose of labeling China a currency manipulator would be to take a
humiliating swipe at the country, Lieberthal said.
Some, like He Weibao, a researcher at
the Chinese Academy of Social Sciences’
Institute of American Studies, worry that
this would invite Chinese retaliation in
the form of a trade war.
Because the US business community – including many Romney backers
– is wary of that prospect, some speculate
that Romney would be unlikely to follow
through on labeling China a currency
manipulator if he is elected. The USChina Business Council has registered
its opposition to the plan, and Bloomberg cited one unnamed Romney advisor
as saying that all of the candidate’s top
advisers also disagreed with Romney's
decision.
“Basically every US political challenger since 1992 has accused the incumbent party of being soft on China on
trade and in more recent years the currency valuation issue,” said Wales of
Oxford Analytica.
“And yet every party when they get
into office soon realizes the size of the
US-China trade relationship, [and]
29
special report
Imaginechina
and US-Japan trade accounts appear
more balanced. If US politicians really
want to reclaim jobs, they would be much
better off focusing on the higher-tech
manufacturing jobs of their closer Asian
allies than on the low-wage assembly jobs
of the Chinese, Huang said.
“Those workers in Taiwan, South
Korea and Japan are being paid
US$30,000, US$40,000 per year,” Huang
said. “Those are the kinds of jobs that you
could reasonably ask, why aren’t Americans producing these things?”
This situation is slowly changing as
Chinese wages increase and low-wage
assembly jobs move across the border
to Southeast Asia. Just as US politicians
previously censured Japan and the “four
Asian tigers” (South Korea, Hong Kong,
Taiwan and Singapore) in past decades,
the US may shift its focus in the future to
criticizing Vietnam or Cambodia as they
generate larger trade surpluses, said Li of
CASS.
that they can’t afford an all-out trade
war with China.”
Bigger fish to fry
Furthermore, these “tough on China” policies are unlikely to bring jobs back to the
US or have much effect on the looming
US trade deficit. While the deficit with
China is by far America’s largest, the US
imported more than it exported with 11
of its 15 largest trading partners in 2011.
The most likely effect of tougher policies on China would be to displace trade
from China to other developing countries, increasing the cost of some goods
for US consumers in the process, Wales
said. “The major beneficiaries wouldn’t be
workers in the US; they’d be workers in
Vietnam, Mexico and other developing
economies.”
30
Besides, much of the US-China trade
deficit results from higher-value components from countries like Japan, South
Korea and Taiwan passing through
China for assembly on their way to Western markets, argues Huang of Carnegie.
Huang illustrates this with the example of the Apple iPad, which retails for
roughly US$650 in the US. Of that sticker
price, Apple takes in about US$300 in
revenue, while about US$250-300 of the
total value goes to manufacturers of the
iPad’s high-tech components in countries like South Korea, Japan and Taiwan.
Only about US$15 is absorbed by China
to pay for the labor that is used in assembly. Yet the total value of the product is
recorded in the US-China trade deficit.
The result is that the US-China trade
deficit balloons, and the US-South Korea
Talk isn’t cheap
US political rhetoric may not be well
grounded in facts, but it can still have
practical consequences. Analysts worry
that the contentious political process
could add to already widespread mistrust
between the countries.
Due to the rapid spread of the internet, Chinese are more exposed to the US
political process now than in any election
in the past. Chinese official newspapers
regularly take the candidates, especially
Romney, to task over their “irresponsible”
and “foolish” comments. “It is advisable that politicians, including Romney,
should abandon … short-sighted Chinabashing tricks and adopt at least a little
bit of statesmanship on China-US ties,”
state-run Xinhua News Agency wrote in
an editorial in mid-September.
Chinese also worry that US posturing will damage the image they are trying
so hard to improve abroad. Anti-China
rhetoric in the election will undoubtedly influence people’s views towards
China, potentially harming relations, said
He of CASS. Perhaps most importantly,
China-bashing gives leaders in both the
US and China less scope to concentrate
on important international and domestic
issues, such as reviving their economies.
Admittedly, the real nature of the
US-China economic relationship is difficult to capture in a 30-second sound bite.
But if US politicians want to revive their
economy, they need to try.
special report
Diplomacy in action
The US will
fare far better
with Chinese
success than
failure, says
Kenneth
Lieberthal of
the Brookings
Institution
B
y some accounts, the world’s most important bilateral relationship is becoming
increasingly uneasy. Trade disputes between
the US and China have multiplied, the US presidential campaigns are rife with complaints about
China stealing jobs and manipulating its currency
and China is disparaging the US for opposing its
claim to the disputed Diaoyu/Senkaku Islands.
The average observer could be forgiven for seeing the relationship as a zero-sum game. But Kenneth Lieberthal, the director of the John L. Thornton China Center of the Brookings Institution,
argues for more nuance. While the US does have
legitimate complaints about China, Chinese success is ultimately good for the US, and vice versa,
Lieberthal told China Economic Review.
Lieberthal has a distinguished career in foreign
policy, serving as a special assistant to the president
for national security affairs and senior director for
Asia at the US National Security Council during
the Clinton Administration. He is also a former
professor of political science at the University of
Michigan and the author of several books, including the recent “Bending History: Barack Obama's
Foreign Policy.”
What are your thoughts on the role that
China has played in the US election? Is it
different than previous campaigns?
It’s significantly different from
2008, but that’s because Obama
made a very conscious decision
in 2008 not to campaign on
China. That’s partly because he
recognized that a constructive
relationship was in our interest, and he didn’t want to campaign on the basis of suggesting that it wasn’t. George W.
Bush, for all his idiosyncrasies
in how he approached friends
and enemies, built a very strong
relationship with Hu Jintao and
the Chinese leadership. While
Obama had a lot of differences
with Bush, he was not going to
argue that Bush fundamentally
made a mistake by building
constructive
relations. If
you go back
before that,
it’s fair to
say that in
most of the
campaigns
since
the
normalization of relations with China, this toughon-China rhetoric has been a part of the campaign.
But I don’t think it’s swayed any electoral outcome
for the White House or even for the House or
Senate. This is part of posturing in a campaign.
It can have real consequences if the challenger is
elected and has made specific commitments, but it
doesn’t shape elections.
What has been the practical effect of Obama’s
more aggressive stance on trade? Is a tough
stance on China good or bad for the US economy?
Obama has no big strategic theory that leads him
to feel that we have to compete with China across
the board. He does not, like some people, believe
that US-China conflict is inevitable. He is a pragmatic problem solver. But the one area where he
is livid – I think that’s the right term to use – is
on China’s economic and trade policies. I’m not
quoting him directly, but I think it’s fair to say that
he sees China following a highly mercantilist set
of policies that disadvantage the US. What he has
done, and I think this is exactly right, is to take
economic issues that need to be addressed to the
WTO. I was in the White House when we negotiated the bilateral trade agreement with China to
join the WTO in the second Clinton Administration, and the major reason behind that strategy
was that we could anticipate all kinds of future
economic problems with China, especially on the
trade side. It is a big emerging economy and it
operates very differently than we do. If you don’t
want to make all disputes into bilateral issues, you
get China into the WTO where they agree to a
set of rules and dispute adjudication procedures.
It may be clumsy at times, but it tends to prevent
trade wars. Obama has basically followed that. I
know in his gut he thinks that the US needs to
take strong action to protect its own legitimate
interests. He’s not someone who thinks we have to
sit back and wait for the Chinese to become liberal
democrats and true believers in the free market.
He thinks you’ve got to use the tools you’ve got,
but don’t use them in a way that makes it much
more difficult to get Chinese cooperation on other
issues, for example, Iranian nuclear development.
What are your expectations from China’s new
leadership?
My own view is that the Xi Jinping leadership
is likely to be enormously focused on domestic
problems, to the extent that they will, if given the
option, seek to tamp down international tensions
so they have more capacity to focus on domestic
issues. If we have a president in office who sets out
to challenge China to teach it a lesson, declare
31
Imaginechina
special report
word travels: A Chinese man shops next to biographies
of US President Barack Obama at a Hangzhou bookstore
it a currency manipulator, apply new
tariffs, execute a variety of unilateral
actions to show the Chinese there’s a new
sheriff in town, Xi Jinping will react very
strongly. And he’ll do so for two reasons.
One is the Chinese have experience with
this before when the US has changed
presidents, and their reaction always is
that you have to show the new guy this is
the wrong way to elicit cooperation from
China. But secondly, Xi recognizes that
he needs to build tremendous domestic political capital in order to carry out
the reforms that are so necessary during
his first five years in office. If in his early
months he is seen as caving to the US, it
will deeply damage his efforts to garner
sufficient political capital to undertake
the domestic reforms that are likely to
be at the core of his agenda. But bottom line, I think the Chinese will want
a much-improved relationship with the
US. On the US side, if Obama is elected,
I think he would be responsive and our
policies would remain pretty much as
they are now. With Romney, there’s
more of an unknown quantity. He’s talking extremely tough on China, but then
again he has no responsibility now but to
get elected. Once elected, when he knows
he has to cope with the consequences of
32
The problems that
Chinese success creates
are more likely ones we
know how to deal with
whatever he does, he may choose to recalibrate significantly. We’ll have to see.
We’re seeing increasing uncertainty in
China now, with the economy slowing
and the leadership transition approaching. Are there scenarios with China you
lose sleep over?
Sure there are. Let me be very candid.
From a US interest point of view, we do
better with Chinese success than we do
with Chinese disappointment or failure.
Having wrestled with these issues for
many years, fundamentally I come down
on that side. The problems that Chinese success creates are more likely ones
we know how to deal with. China now
faces one of the most difficult challenges
it’s had since the 1970s: the challenge of
significantly restructuring its economy
at a time when the political system is
structured in a way not to allow that to
happen. The incentives for the top party
and government leaders in each locality
from the provincial level down to the
township level – even if this is only the
top two people [in each location] we’re
talking about, it’s more than 70,000 officials – are very much built around the
model that has produced all the growth
of the last 30 years. That model has been
the basis for rewarding and promoting
these officials, so not surprisingly they are
comfortable with that model and have
learned how to milk it for satisfaction.
The economic development model of the
12th Five-Year Plan, which is a model
that suits both Chinese and American
interests very well, requires restructuring those incentives in a major way. It’s
going to be extremely difficult for the top
leadership in China to develop the political will power and capacity. You also now
have enormous SOEs that are extremely
powerful and that would be disadvantaged by the 12th Five Year Plan, and
many of them are linked to elite families.
So while they formally adopted the 12th
Five-Year Plan in March of 2011, I see
very little evidence at this point that we’re
going to have rigorous implementation
of it. Without rigorous implementation
of the 12th Five-Year Plan, China within
10 years is going to be in deep trouble.
special report
What are the major problems China
could face?
The current model is based on assumptions that are largely exhausted at this
point, assumptions about a very large
cohort of workers in the 18- to 35-yearold bracket, assumptions about the
capacity of the international system to
keep absorbing very large increases in
Chinese exports, assumptions about the
capacity of the eco-system to permit
China to develop now and clean up later,
and assumptions about popular tolerance
of corruption, inequality of wealth, and
environmental degradation. All those
assumptions were accurate ten years ago,
but they’re now largely exhausted. The
major problem with the current model is
that it’s increasingly inefficient. It’s a very
resource intensive model in a country
that has a real shortage of resources. But
even beyond that, the big Achilles heel is
that it generates social tension. And especially if there’s an economic slowdown,
so incomes aren’t rising rapidly, then all
the other downsides – cancer villages,
corruption, inequality of wealth and so
on – become increasingly worrisome. The
Standing Committee and the Politburo
At the end of the day,
the link between the
domestic situation
and foreign policy
is profound, but it’s
also not completely
predictable
can make some changes and implement
them in Beijing, such as changing interest
rates at state-owned banks, required bank
reserve ratios and the Qualified Foreign
Institutional Investor quotas, and that all
has an impact. But that doesn’t change
the outcomes of the system as a whole. If
structural reform fails, we’re going to be
dealing with a country where extremism
from both the left and the right is more
likely to play a larger role, where repression of civil liberties is likely to grow as
instability grows, where the consequences
in terms of global climate change are
likely to be exacerbated, because China
will not have shifted away from an
extraordinary stress on energy-intensive
manufacturing.
Does US policy have any sway in that
outcome?
If the US adopts a highly adversarial posture toward China, that’s more likely to
lead China in the wrong direction. Nevertheless, at the end of the day the link
between the domestic situation and foreign policy is profound, but it’s also not
completely predictable. You can always
have someone take a foreign crisis and use
it to say we must carry out major domestic reform to be set for the future. Or you
can have someone take a foreign crisis
and say we have to mobilize the military
and repress dissent, and we can’t afford to
diddle around with the economy. As that
“great sage” [former American baseball
player] Yogi Berra said, “Predictions are
always difficult, especially when they’re
about the future.” But if we have to place
a bet, we should be betting that Chinese
success is good for the US, that deep
domestic failure is much more problematic for US interests, and that we have a
greater ability to tip the balance to the
downside than to foster the upside.
33
cover story • commodities
Poor prospects
China's slowdown has plunged the hard
commodities market into uncertain territory
bet the spend, p37
Investing in metals is getting
trickier following a boom in
the last decade
34
divining the truth, P38
As most metals prices
decline, analysts disagree on
the direction of copper
cover story • commodi ties
CREDIT: Peter Van den Bossche
I
n August, mining giant BHP Billiton
halted its planned expansion of Australia’s massive Olympic Dam copper
mine, its largest of at least US$50 billion
in cuts and delays this year. In October,
Brazil's Vale SA, the world's largest iron
ore producer, slashed its projected annual
output of the metal by 18%. Australia's
Fortescue Metals Group went so far as
to suspend company barbecues, lock stationary cabinets and take away free coffee machines this fall. Rio Tinto, Anglo
American and Xstrata have also tightened their belts.
In a few months, the boom metals
industry – in which even truck drivers
have made more than six figures – was
suddenly at risk of a bust as hard commodity prices fell. The cutbacks are
occurring around the globe, but they can
all be traced back to one source: China.
China drove a boom in global commodities during the last decade, lifting
generally volatile and uncertain metals
markets to unprecedented heights. The
price of many key metals shot up fivefold or more, as China’s consumption
grew to at least 40% of the global supply of dozens of metals and minerals. But
analysts say that the country’s recent economic slowdown has brought the end of
this so-called “super-cycle” of growth.
China's GDP growth slowed to 7.4%
in the third quarter, the seventh consecutive quarter of deceleration, and economists widely predict that future growth
will not exceed 10%. Sluggish trade globally, as well as rising wages, an aging population and lower returns on fixed-asset
investment within China, all indicate
that the country’s era of investment- and
manufacturing-led expansion may be
nearing an end. Instead, China will need
to shift its economy toward consumption
and services, areas that are inherently less
metals intensive, or risk a potential economic crash.
This slowdown is set to reshape the
global economy, and hard commodities are among the first markets being
remade. As prices of commodities such
as iron, aluminum and copper retreat, the
balance of worldwide economic growth
will shift away from commodity-producing economies, such as Australia and Brazil. Analysts disagree on the extent of this
slowdown, but most agree that metals
prices are likely to keep declining as the
world realigns around a changing China.
“The peak that we saw in 2009 was
the highest peak we’ve seen since 1870,”
said Gerard Minack, global cross-asset
strategist at Morgan Stanley Australia.
“It’s a once in a century peak ... I doubt
you'll see those levels ever again.”
Once in a century boom
The beginning of the metals super-cycle
surprised miners as much as its end has.
Following a 20-year down market, metals prices began rising in the early 2000s
when Chinese demand started to push
miners worldwide to the limit of what
they could produce. Flush with cash from
decades of miraculous growth but short
on domestic resources, China imported
massive amounts of metal. As metals
prices shot up – copper prices increased
nearly 10-fold – commodity-rich countries like Australia, Brazil and Indonesia
saw their incomes, their standards of living and the values of their currencies rise.
Metals companies were initially skeptical that such a surge in demand could be
sustained. Most waited roughly five years
into the super-cycle before deciding to
increase production, said Paul Robinson,
a metals analyst at independent research
firm CRU Group.
After that, actually expanding capacity took years. Processing facilities such
as aluminum smelters typically take 18
months or more to build, while underground mines require far longer to
develop. “To take a copper mine from
a twinkle in a developer’s eye to actually producing is probably 10-15 years,”
Minack said.
That extra capacity has only begun to
come online in the last few years and is
set to increase substantially by the end
of the decade. Global iron ore capacity should roughly double to 2.6 billion
tons by 2020, according to a recent note
by Minack. The supply glut will persist
well into the next decade, with mainland
production of non-ferrous metals (metals
other than iron) estimated to peak around
2030, said Guo Chaoxian, an industrial
economics analyst at the China Academy
of Social Science.
Shocking the system
This rising supply of iron, aluminum
and copper is colliding with the slowing growth of Chinese demand. Iron
ore prices fell 26% this year as of midOctober, while the prices of copper, lead
and aluminum are all trading below the
historic price peaks they reached in the
last decade.
These decreases have pushed global
35
metals companies into defense mode.
They are now scrambling to boost efficiency by cutting staff, delaying planned
capacity expansions and shutting down
some higher-cost operations.
But those measures will not likely
be enough to prevent declines in profits. Following a year of record profits for
the mining sector in 2011, Britain’s Rio
Tinto and Switzerland-based Xstrata
have reported more than 30% declines in
first-half earnings, while BHP reported
a 35% drop in profits for the fiscal year
ending June 30.
Profits are likely to fall more sharply
in roughly one year, when long-term
fixed-price contracts begin to expire, said
one analyst, who spoke on condition of
anonymity since he is not authorized to
speak to the media. “Most of the miners
can still be profitable but less profitable
than they’ve been previously,” he said.
Other analysts predict earnings per share
for the sector in 2013 to show doubledigit declines.
Metals companies will also find it
more difficult to secure financing, adding
to pressure to shut down less profitable
operations. Lenders are wary of financing
any miners when even majors like BHP
Billiton are delaying giant projects like
Olympic Dam, said Mike Elliott, head of
global metals and mining at accountancy
Ernst & Young.
With metals accounting
for 6% of global trade
in 2010, a decline in the
market will weigh on
already-flagging trade
levels
Financing pressure is likely to be more
severe within China, which is experiencing an oversupply of coal, iron ore and
aluminum. According to Craig Charney,
research director at consulting firm CBB
International, in the third quarter “interest rates for the [mining] firms that were
fortunate enough to get loans shot up like
rockets. And this was true whether they
were state or private.” Chinese firms that
turn to the domestic shadow banking
system to keep projects afloat may find
that the usurious lending rates only compound their troubles.
Indeed, Chinese miners are likely
to be among the first pushed out of the
market as prices fall. With a few exceptions, Chinese miners generally operate
at higher costs, since the country is relatively resource poor and those resources
it does have are more costly to access.
Domestic iron ore mining is already
being scaled back, and Chinese output
may fall from 330 million tons in 2011
to about 250 million tons this year due
to price declines, according to data from
investment bank CLSA.
“It’s for sure that many [Chinese]
companies will eventually be forced to
exit,” said Guo of CASS. “In a market
economy, as the industrialization process continues and market regulations are
further improved, the competition will
intensify.”
Many Chinese miners, as well as
metals processors and some provincial
governments, are likely to suffer because
they have bought into metals during the
boom years, a practice that Michael Pettis, a Peking University finance professor,
terms “pro-cyclical investment.” Companies have a short-term incentive to stockpile hard commodities in a bull market
because, as metals prices rise, the value
of stockpiles on balance sheets increases,
which can then be reported as profit, Pettis argues. But this same principle will hit
many Chinese firms with outsized losses
when price declines drag down the value
of their stockpiles.
World of woe
With metals accounting for 6% of global
trade in 2010 according to research firm
Capital Economics, a decline in the market will weigh on already flagging trade
Chinese imports by country (US$mn), 2001-2011
90,000
Copper Index (US$/metric ton)
$12,000.00
80,000
70,000
$10,000.00
60,000
$8,000.00
50,000
2004 – After years of steady growth,
Chinese imports of metals jump.
Copper imports roughly double, and
iron imports triple year-over-year
$6,000.00
40,000
30,000
$4,000.00
20,000
$2,000.00
10,000
Source: CEIC
36
Indonesia
Source: London Metals Exchange, CRU
2006
Australia
2005
Brazil
2004
$0.00
Chile
2003
0
levels. The WTO has cut its estimate for 2012 trade growth to
2.5%, down from an expected 3.7%. Knock-on industries dependent on trade will also face weaker business, with the already
sluggish shipping industry chief among them.
Some economists, including Pettis of Peking University, predict a reordering of global economies. Global growth darlings
including Australia, Brazil, Indonesia and Chile will no longer
outperform, while the price decrease will be “like a huge tax cut
for the commodity-importing countries” such as the US and
Mexico, Pettis told China Economic Review. “He who is first
shall be last, and he who is last shall be first.”
Jayant Menon, lead economist at the Asian Development
Bank, argues for a more moderate view. Menon predicts that
countries like Australia and Brazil will fall back on well-developed service sectors and on agriculture as food commodity prices
continue to rise. With the US and European economies shaky,
money will still flow into Australia and Brazil in search of high
yields and low risk.
However, GDP growth, living standards and currency valuation will nevertheless fall in tandem with exports, Menon said.
“There’s just been a party with them, if you like, with champagne
flowing over the brim. That will all go away.”
Consumption or bust
In the longer term, analysts have drastically different views on
China’s growth and expected demand for commodities. Investment bank economists generally predict that China's GDP
growth will bottom out in the fourth quarter or early next year
and hold steady at around 7% – perhaps the best-case scenario
miners can hope for. Guo at CASS expects growth to stabilize at
a more moderate 5-6%. Pettis, among the most bearish observers, predicts that growth will average 3-4% or lower during the
next decade.
Pettis' prediction rests on the assumption that Chinese
Market value of steel and copper, 2003-2012
CRU Steel Index
October 27, 2008 – The US announces
negative GDP growth, indicating the
start of the US recession
CRU Steel Index
300
250
200
April 15, 2011 – China announces
its first quarter of slower growth,
signaling the start of the current
downturn
150
100
Copper prices
50
2012
2011
0
2010
2009
2008
2007
Early 2006 – US housing prices peak
and the bubble starts to implode.
Investors put money into commodities, seen as a safe bet
Bet the spend: Investing in
metals is getting trickier
Commodities used to get no respect. A decade ago, trading in
commodities were seen as being risky and obscure, an asset
class best left to those with intimate technical knowledge of
the market, writes Dambisa Moyo, an economist and former
investment banker, in her book “Winner Take All: China's
Race for Resources and What It Means for Us.”
That era ended when hedge fund manager Jim Rogers
argued in his 2004 book that the asset class deserved both
respect and investment. “Hot Commodities: How Anyone
Can Invest Profitably in the World’s Best Market” triggered a
60-fold increase in investment from 2000 to 2011.
These newcomers mostly speculated on the trend of continued growth, a relatively safe assumption in the last decade
as Chinese demand skyrocketed. But going forward, investors
may be better off leaving metals to the true commodity wonks.
Analysts say the market will likely revert to an era where
betting on across-the-board price trends is a losing strategy,
and only commodity experts trading on the smaller minutiae
of the industry see consistent gains. Winning investments are
likely to be made by trading on short-term ups and downs
related to inventory changes, supply and demand shifts for
individual metals or even weather patterns.
Trending topic
But even leading commodity experts disagree on the particulars of the market. In the short term, a major debate among
analysts is how much of an effect China's stimulus measures
will have on commodities prices. China’s central government
has approved US$111.5 billion in railway spending this year to
bolster the economy, in addition to local government plans to
spend at least US$600 billion.
Ian Roper, a commodity strategist at CLSA, said the stimulus will bring little unexpected spending, and that previously
planned projects are just being sped up. “[Beijing officials]
are getting more like Western politicians, just re-announcing
policy.” However, Mike Elliott, head of metals and mining at
accountancy Ernst & Young, said that the announced infrastructure spending could increase metals demand soon if
the central government executes on its plans quickly, as it is
known to do. For example, the government has announced
US$8 billion in railway spending and approved 25 railway projects in recent months, which would increase steel demand.
In the meantime, the announcements themselves have
lifted metals markets, said John Mothersole, senior economist at consultancy IHS Global Insight. But prices will fall
if data begins to show that the stimulus is not having its
intended effect, and many analysts doubt that governments
will follow through on these ambitious plans. “In some sense,
this is a classic [case of] buy on rumor, sell on fact.”
Deciphering the impact of stimulus spending will be difficult. The easy gains of the last decade that earned commodities respect are giving way to increasingly uncertain returns.
As the market shifts, investors may continue to respect commodities – but they don’t have to like them.
37
Divining the truth: As most metals prices decline, analysts disagree on
the direction of copper
The way most traders and analysts operate borders on divination. Whether a
quant finds a statistic that pushes him or
her to buy or a chartist spots an unusual
pattern spelling the beginning of a down
cycle, all traders must fish details out of
a sea of conflicting information to determine whether to buy or sell.
Analysts who point their divining
rods to the metals market have enjoyed
a decade of upward growth. Now, in the
face of a slowing and rebalancing China,
they are finding their prognostications
murkier. Of all the metals, copper – a
key component in electric wiring and
electronics – is most likely to send analysts’ forked-sticks careening in opposite
directions.
Copper prices are closely tied to Chinese demand: China has 6% of world
copper reserves but consumes roughly
40% of global supply. The metal delivered
investors some of the highest returns of
the super-cycle, posting a nearly 10-fold
price increase before peaking last year.
But that doesn’t mean copper prices
will collapse as China’s economy shifts.
Policy watchers say China must transition away from its investment-based
growth model, which is delivering diminishing returns, toward a model based
on consumption. Many analysts say this
will boost purchases of copper, which
is widely used in consumer goods like
mobile phones, appliances and cars, and
keep prices from deflating. However, others say those predictions overlook basic
shifts in copper supply and the unsustainable nature of China's metals consumption.
Copping to consumption
Patchy reports on copper stockpiles highlight how difficult it can be for analysts to
know even basic facts about the market. Analysts must physically make the
rounds at Chinese companies to check
their inventories and then make a best
guess about the size of large national
stockpiles.
This has lead to drastically different
anecdotal accounts. Media reports and
some analysts say that stockpiles of copper are stacked to the ceilings in ware38
houses and overflowing into parking lots.
With such high inventories, firms would
likely choose to run down their stocks
rather than buying on the open market,
meaning prices would be more likely to
sink than rise. Yet other advisory firms,
including Barclays, have concluded from
their checks that stockpiles are not high.
They are therefore bullish on copper.
Other analysts say that inventories
won't sway long-term prices much. “The
inventories angle is overblown,” said Ian
Roper, a metals analyst at CLSA. Instead,
structural changes in the Chinese economy will determine prices. Each stage
of development in emerging economies
corresponds to the use of different metals, Roper said. Early-cycle development
necessitates construction, so demand for
steel – half of which goes to construction
– and iron increases rapidly.
In later-cycle development, rising
demand for higher technology products
drive demand for metals such as copper – 40% of which is used in consumer
goods – and nickel. Another 40% of copper is used in electrical wiring by China’s
power industry, which benefits from
growing demand for electricity from factories in earlier stages of development
and from consumers in later stages.
These trends, as well as the relative
scarcity of copper in the earth’s crust
compared to iron or aluminum, will
continue to support prices through the
decade, Roper said. He predicts the price
of copper could rise above US$8,800
per metric ton next year from
roughly US$8,200 per metric
ton as of mid-October.
Bears see plenty of holes
in this theory. First, copper supply will increase from
roughly 13 million metric tons
in 2011 to 21 million tons in 2018,
according to a recent note by Morgan Stanley Australia. Second, the
price of copper is far higher than
its cost of production, indicating the
price is determined more by investor sentiment than underlying cost,
said Ross Strachan, a commodities
economist at research firm Capital
Economics. Strachan predicts that
a worsening of the euro zone crisis could
cause investors to grow risk averse and
flee the market, lowering copper prices
to US$5,000 per metric ton by the end of
2013.
Longer-term arguments revert to
more basic economics. Dambisa Moyo,
author of “Winner Take All: China’s Race
for Resources and What It Means for Us,”
foresees a continuation of the mediumterm trends: Long-term global scarcity
of copper combined with a desire for consumer goods will keep prices high, she
said.
But Peking University finance professor Michael Pettis disagrees, arguing
that China's consumption of metals is far
more likely to fall rather than rise. China
already consumes a huge amount of metals compared to the size of its economy;
it used roughly 40% of global copper but
generated only 11% of global GDP in
2011. Consumption-based economies,
the ranks of which China hopes to join,
generally use a lower percentage of the
world's supply of metals than their share
of world GDP.
Analyst viewpoints diverge widely, but
one thing is certain: Metals markets are
returning to the pre-super-cycle era of
analysis. A rising tide will no longer lift all
boats and an individual commodity will
trade more on its individual story, said
John Mothersole, a senior economist at
analysis firm IHS Global Insight.
Having financial diviners agree what
that story is, however, will be an entirely
different matter.
Imaginechina
big wheels: A slowdown in the commodities market will have
knock-on effects on industries from shipping to mining machinery
policy makers get serious about rebalancing. Investment growth needs to fall
below consumption growth for the economy to rebalance, he wrote in a recent
note. But with investment being such
a large economic driver, any slowing in
investment will necessitate a slowdown in
overall GDP growth, likely to around 3%.
“Under these conditions I don't see
how we can avoid a very nasty two or
three years ahead for commodity producers,” he wrote, predicting that prices
of certain hard commodities could fall by
50% or more in that time.
But rebalancing may still be a long
way off for China, said Guo of CASS.
Consumption outgrew investment in
the first three quarters of the year, but
government policies continue to favor
investment. Beijing is also relying on
investment to drive growth in China’s
less developed west and to lessen regional
economic imbalances.
With such wide disagreement, the
safest bet for long-term commodities
investors is to wait out this transition in
hope that China's economy will stabilize, Beijing will set a clear course toward
rebalancing and the economic outlook of
“Under these conditions
I don't see how we can
avoid a very nasty two
or three years ahead for
commodity producers"
-MICHAEL PETTIS, PEKING
UNIVERSITY
the US and Europe will improve.
The timing of rebalancing may not
be clear, but its long-run consequences
are. Commodity prices would be unlikely
to rebound beyond historic peaks for
decades, as no large economies are poised
to grow fast enough to take China's place
driving demand. For commodity investors, rebalancing is still better than the
potential alternative: a China that racks
up debt to the point where it destabilizes
the economy and sends the country into
decades of stagnation like Japan.
Even if metals prices come down,
Chinese firms will continue to buy up
metals assets worldwide, analysts said.
From a market standpoint, “[Beijing]
shouldn’t really need to worry about it,”
said Ian Roper, a commodities strategist
at CLSA. “It’s really more from a security or supply aspect – it makes them
feel comfortable that they own it.” Chinese companies conducted roughly 13%
of global mining mergers and acquisitions in the first half of the year, jumping
from 7% in the same period a year prior,
according to PwC.
China is buying in at a time when the
market is declining, but the rollercoaster
of volatile commodity prices lumbers on.
“Commodities prices never move in a
straight line, of course,” said Minack of
Morgan Stanley. “For me, the super-cycle
was a sequence of a decade where we had
higher highs, higher lows, so the trend
was up … This adjustment that I envisage
is once again not a straight-line move. It
might be a series of five or 10 years when
we have lower lows, lower highs,” he said.
Unlike a rollercoaster, the way down
will be far less thrilling. But in its bid for
self-sufficiency, China ensures that wherever the market goes, it is strapped in and
along for the ride.
39
media partnership
The UK welcomes Chinese investments
The UK is now home to more than
400 companies from mainland China,
according to the UK Trade and Investment (UKTI), a UK government
department which helps British
companies achieve success abroad.
In London alone, Chinese businesses
make up the second-largest group of
foreign direct investors. The British
Business Awards recognizes the
importance of Chinese direct investments into the UK and includes a
‘Chinese Investor of the Year’ Award
as one of its eight award categories
which also include Sustainability, a
Chinese UK Alumnus Award; Entrepreneur of the Year Award; Innovation Award; Creativity Award; Financial & Professional Services Award
and a British Company of the Year
Award.
to UKTI statistics. As the third-largest
investor in the UK, up from seventh
the year before, China is poised to
further increase investments in the
UK as the country encourages major
companies to expand globally.
Chinese companies in the UK come
from a diverse range of sectors,
including fashion, publishing, manufacturing, telecoms and transportation. The Chinese Investor of the Year
Award, sponsored by law firm Hogan
Lovells, recognises the contributions
made by Chinese companies to the
UK economy. Five finalists, including
Bosideng, China Youth Publishing
Group, Chongqing Machinery &
Electric Co., Hytera Communications
and Zhuzhou CSR Times Electric Co.,
have been selected for a place in this
award category. In 2011, China
created 92 projects in the UK, which
translates into 2,116 jobs, according
Chinese business leaders share their experience of
doing business in the UK with their UK counterparts, at
China Business Day held in London ahead of the
Olympic Games this summer.
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40
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http://weibo.com/cerchinese
ON benelux
Imaginechina
spotlight
Into the lowlands
Belgium, the Netherlands and Luxembourg are banding together to attract a new
phase of Chinese investment
F
ew people on the mainland will
realize it, but Europe's largest cluster of Chinese banks is forming in
the tiny country of Luxembourg. China
Construction Bank (CCB) announced in
September that it would open a branch
and a subsidiary in the country. Insiders have said the subsidiary will likely
become CCB's European headquarters,
following on the heels of other Chinese
banks such as Industrial & Commercial
Bank of China (ICBC) and Bank of
China (BoC).
The country of 500,000 isn't the only
northwestern European state to appeal to
Chinese companies as a destination for
their headquarters. And China's megabanks aren't the only ones eyeing what
have historically been called Europe's
“Low Countries.”
During the past two years, Belgium,
the Netherlands and Luxembourg –
known collectively as Benelux – have
experienced a rapid increase in Chinese
investment.
Now the countries are looking to reel
in a new phase of service-oriented investment from China, their hooks baited
with a platform of logistics and financial
expertise. The relatively small size of the
Benelux market will make for a difficult
catch, however.
Many Chinese companies still view
the EU as dozens of separate markets.
Changing this perception will be crucial
to the success of Benelux's pitch.
“What we are trying to promote – as
I know the Dutch and Belgians are doing
– is serving the rest of the market as a
41
spotlight • bene lux
European headquarters,” said Nicolas
Mackel, consul general for Luxembourg
in Shanghai.
The final outing
China's interest in the region isn't a
recent development. What's new is the
kind of investment moving into Europe's
Low Countries, and the volume in which
it is arriving.
Chinese companies, starting with
state-owned firms, have invested in Benelux since China opened its doors to
the world in the late 1970s. BoC established a branch in Luxembourg in 1979.
COSCO, one of largest shipping companies in the world, docked in the Netherlands in the 1980s.
Early last decade, China's turbocharged growth sent commodity prices
skyrocketing worldwide. In an attempt to
better control the prices of raw materials such as iron and oil, Beijing pushed
state-owned firms into a global hunt for
natural resources, a so-called “going out”
strategy. China's annual outbound for-
eign direct investment (FDI) leapt from
US$2 billion in 2004 to about US$50 billion in 2008, a compound annual growth
rate of 130%, according to research and
advisory firm Rhodium Group.
Foreign acquisitions didn't stop with
resources. An increasing number of private Chinese enterprises joined an international buying spree of technology and
name brands. Equity was another target on the government's list of interests
abroad.
During the past two years, China's
“going out” process has matured. The
new wave of companies moving onto the
global market is searching for not coal or
technology, but consumers. Unlike previous outbound efforts, the trend is driven
by private enterprise, not government
policy.
Finance magnet
Chinese FDI to Europe swelled to
US$10 billion per year in 2011, or about
25% of China's global outflow, according
to the Rhodium report. But the inflows
Chinese foreign direct investment, 2010
Britain
Be
ne
lu
x
Germany
$45.3m
Chinese FDI into
Belgium
France
$65m
Chinese FDI into
Netherlands
$3.2b
Chinese FDI into
Luxembourg
Source: MOFCOM
42
have entered Europe unevenly.
Eastern Europe has attracted the
largest share of manufacturing investment, with Chinese factories producing
machinery and cars in countries such as
Poland and Slovakia. Technology buyouts
have targeted Germany, as have companies looking to quickly tap Europe's
biggest consumer market. Compared to
Germany or France, far fewer Chinese
companies have targeted Benelux as a
manufacturing hub or major consumer
market.
Official FDI data on Benelux as a
bloc is almost non-existent, but data
pieced together from the three countries
indicated the vast majority of inflow from
China – about 97% – was headed toward
Luxembourg's financial sector. Luxembourg is the world's second-biggest manager of investment funds after the US, as
well as the EU's largest wealth management center.
The country of little more than 2,500
square kilometers absorbed US$3.2 billion in Chinese FDI in 2010, or just over
50% of the EU's total FDI intake from
China, according to the most recent data
available from China's Ministry of Commerce (MOFCOM).
The trend is set to continue. Although
ICBC and BoC have had a presence in
Luxembourg for decades, only in past
three years did both banks establish EU
headquarters in the country. CCB will be
the next mammoth financial institution
to follow suit.
Chinese companies and banks looking to grow in Europe are also attracted to
the 64 double-taxation agreements Luxembourg has signed with other jurisdictions, Mackel at the Luxembourg consulate said. “We see Luxembourg more and
more being used by Chinese investors for
investments in other European countries,
or much further on in Canada or Russia.
A lot of big Chinese gas and oil deals are
being structured through Luxembourg,”
he said.
Gateway to Europe
It's not just Chinese cash that is flowing
through Benelux, it's also Chinese wares.
More than 65% of shipping containers
passing through major European ports
will enter or exit the Netherlands or Belgium.
The port of Rotterdam in the Netherlands, Europe's largest, accounts for by
far the largest share. About 40% of all
shipments headed to Germany, the EU's
heavy industry: Chinese construction machinery
maker Zoomlion set up its EU headquarters in Belgium
biggest economy, pass through Rotterdam, according to Guy Wittich, executive director for China at the Netherlands
Foreign Investment Agency. “You could
see Holland as one big logistics hub, particularly for Germany,” he said.
In 2010, Chinese FDI in the Netherlands totaled US$65 million, a 188%
year-on-year increase, according to
MOFCOM. And in the past year and a
half, Wittich said investment has jumped
exponentially.
Investments in Western Europe have
often also triggered investment in Benelux – often in the Netherlands, which
now hosts 332 companies. “It's a logical
step to set up your business where your
goods are entering the European Union.
That's why we are capturing so many of
these European distribution centers,”
Wittich said.
Construction machinery makers
LiuGong and Zoomlion exemplify how
Chinese companies have used Europe's
production and logistics resources while
The vast majority of
inflow from China –
about 97% – was headed
toward Luxembourg's
financial sector
also targeting the domestic consumer
market. LiuGang’s primary market,
as well as its innovation center, is in
Germany, and the company purchased
manufacturing plants in Eastern Europe
earlier this year. However, LiuGong
chose the Dutch city of Almere for its
European headquarters. Zoomlion has
followed a similar pattern, setting up its
headquarters in Belgium.
Although they remain overshadowed
by Luxembourg's ultra-low tax regime,
Belgium and the Netherlands are home
to some of the EU's most competitive tax
Imaginechina
preferences.
Companies based in the Netherlands
are allowed to remit profits from global
operations into the country tax free,
compared to standard withholding taxes
of 15% elsewhere in Europe. The policy
has attracted companies such as Huawei,
which has relocated its financial operations to the Netherlands.
“If you're a large company like Huawei, you can save literally millions of
euros on this kind of tax,” Wittich said of
the withholding tax policy.
Slower, smaller Belgium
Competing with the Netherlands has
been a challenge for Belgium. Although
its tax policy is on par with the Netherlands, Belgium's logistics capacity and
domestic market are smaller. The country
attracted US$45.3 million in Chinese
FDI in 2010, less than the Netherlands
or Luxembourg.
Recognition is Belgium’s primary
challenge. The country is far less
43
Strength in numbers
Only recently has the Benelux Chamber of Commerce
brought together businesses from across Benelux to discuss attracting Chinese investment. The chamber, with
about 300 members, is also networking with Chinese
chambers of commerce in the region and collecting previously unavailable trade data.
But despite the potential for enhanced connectivity,
Benelux countries are still competing for the same Chinese customers, said Guy Wittich, executive director for
China at the Netherlands Foreign Investment Agency.
Competition will remain intense as long as Chinese
investment continues to pour into the region.
“Whether there is overlap, or whether we can complement each other – that, I think, is the big question,” Wittich
said.
44
Imaginechina
The Chinese word for Benelux, Bihelu, elicits blank stares
from most people in the Middle Kingdom. However, many
in China will recognize the countries represented in this
small customs bloc in northwestern Europe: Belgium, the
Netherlands and Luxembourg.
Benelux won't become a household name anytime
soon in the East, but its importance could rise if the region
boosts logistical ties at home and improves recognition
within China.
Benelux lost some clout since the formation of the EU,
but lately there has been much more talk within the three
countries about focusing more on the bloc, said Philippe
Snel, chairman of the board of directors for the Benelux
Chamber of Commerce in Shanghai.
While a treaty binds the three countries, commerce
officials say the bloc, established in 1948, is largely redundant outside a few intellectual property regulations. Businesspeople from the region, however, are homing in on
the potential selling points of a better-connected Benelux,
Snel said.
One of Benelux's primary advantages is that it boasts
Europe's most advanced logistics network. The EU's two
largest ports, Rotterdam in the Netherlands and Antwerp
in Belgium, are separated by only about 90 kilometers,
and the two countries are in talks on merging, Snel said,
although he admitted that significant political obstacles
remained. If merged, the port would be one of the biggest
in the world.
Landlocked Luxembourg is positioning itself as an
inland logistics hub behind the two sea ports, which have
become congested, said Nicolas Mackel, the consul general for the Luxembourg consulate in Shanghai. If conimproved,
cargo
that Chinese
arrives in Antwerp or
TOOnectivity
MUCH OFisA GOOD
THING:
The more
can be the
fast-tracked
by they
rail are
and flown out of
withRotterdam
Australian degrees,
less valuable
Luxembourg's cargo airport. Cargolux, one of Europe's
largest cargo airlines, makes 22 cargo flights to China per
week from Luxembourg.
Imaginechina
To be or not to be: Benelux
re-emerges from redundancy
traffic control: More than 65% of shipping containers passing
through major EU ports will enter or exit the Netherlands or Belgium
known in China and has yet to differentiate itself from the
Netherlands' reputation as a logistics hub or Luxembourg’s position as a financial center.
As a result, price competition is one of Belgium's main
pitches to Chinese companies. Both establishing and operating a company in Belgium are much cheaper than in the other
Benelux countries, said Janet Chow, an investment deputy
for greater China at the Consulate General of Belgium in
Shanghai. “The Netherlands is a hot country right now. Chinese
companies are much more familiar with this country. But this
means there is more competition within the Netherlands, and
prices are higher,” Chow said.
As one of Europe's primary hubs for car export and import,
Belgium also offers an advantage in automobile logistics. Chinese car makers including Geely have established bases in the
port of Zeebrugge, which sees more vehicles pass through than
any other port in the EU.
The platform pitch
Connectivity within Benelux is on the upswing. On the logistical forefront, the three countries are in talks on cooperation that
could further enhance the region's appeal as a springboard into
Europe (see box).
Still, not all Chinese companies are sold on the concept of
jumping into markets such as Germany and France from a Benelux base. Efforts by the three countries' consulates, as well as by
the Benelux Chamber of Commerce, are increasingly focused on
convincing outbound investors to consider Benelux a launching
pad into the region as a whole.
“It's a process, a very energy-consuming process,” Mackel at
“It's been hard to get the point across
that you shouldn't look at the EU as 28
different markets but as one market”
- NICOLAS MACKEL, LUXEMBOURG
CONSULATE IN SHANGHAI
the Luxembourg consulate said. “It's been hard to get the point
across that you shouldn't look at the EU as 28 different markets
but as one market, and that you can save overhead by pooling
[operations] in one place.”
Investment in Germany has been a no-brainer for a first
wave of Chinese businesses seeking an international consumer
base. Establishing a company in Benelux is not as self-intuitive.
The region's share of the investment will depend heavily on the
ability of its China-based commerce representatives to promote
its advantages.
But China's search for consumer markets abroad is still in
its infancy. Rhodium Group has projected that Chinese outbound FDI will total US$2 trillion between 2010 and 2020.
The research firm said the EU could absorb as much as US$500
billion in Chinese investment during the 10-year period, representing a substantial increase in mergers and acquisitions and
greenfield operations.
“You have to bear in mind that Chinese companies have only
very recently started to go out,” Mackel said. “The companies on
the outside now are among the pioneers.”
45
co-published Q&A
Interview • Stella Artois
Brew master
International
stars shared
Stella Artois
in Hainan.
Alexander
Lambrecht,
director
of global
brands for AB
InBev APAC,
discusses the
beer's success
I
n October, Belgian premium beer company
Stella Artois sponsored the 2012 Mission Hills
World Celebrity golf tournament on Hainan
Island, a tournament that rolled out the red carpet
for international stars such as Hollywood's Adrien
Brody and Andy Garcia. Alexander Lambrecht,
director of global brands at AB InBev APAC, discussed the beer's success at the Mission Hills tournament and its entry into China’s high-end beverage market.
What did Stella Artois deliver as the sponsor of
the Mission Hills tournament in Hainan?
We introduced Stella Artois to a broader audience
in a very sophisticated, very affluent environment.
All the guests attending the tournament had the
opportunity to enjoy Stella Artois served by one
our Stella Artois world draft masters, one of the
best bartenders in China. And to the broader audience, we introduced the brand in a limited and
sophisticated way.
How does the tournament fit into launching
Stella Artois in China?
We have accelerated the support and the launch of
Stella Artois since last year in China. In order to
do so we are continuously looking for platforms or
activities that enable us to interact with our very
affluent consumers. When we came across the
Mission Hills opportunity, it was an automatic fit
between the people attending the tournament, the
people playing golf, the people going to the Mission Hills clubs and resorts. It is a very important
recruitment and introduction platform for Stella
Artois in China.
What kind of presence does Stella Artois have in
China?
We have had a presence for a long time in China
through collaboration with some great importers
and distributors. However, since last year, we have
46
started activating the brand through our AB InBev
network. The brand has become very important in
the AB InBev portfolio and will equally get the
support it deserves in order to build the brand in
the right way. And that’s why since last August,
when it joined AB InBev, we started with a focus
on Shanghai, Beijing and Guangzhou.
Where will Chinese customers find Stella?
Today, we are primarily focusing on the high-end
accounts, with a strong focus on high-end nightlife, Western bars and five-star hotels. That has
been the priority at this stage. And so far, the early
signs are very, very positive for Stella Artois. Stella
is being sold in more than 70 countries around
the world. We have a very clear understanding of
how we need to introduce the brand in countries,
because we’ve done very successful introductions
in Argentina and more recently also in the US.
We introduced the brand in a very focused area,
and that is exactly the strategy we are applying in
Shanghai, Beijing, and Guangzhou. This allows us
to carefully present Stella Artois with the chalice.
We know that we have a winning liquid. We know
that the way we present our brand is super premium and very sophisticated.
How did you feel seeing Stella Artois being
enjoyed at this prestigious event in China?
It’s great to see excitement from not only the sports
industry, but also the entertainment industry. As a
brand, we are not married to golf. We want to associate ourselves with very affluent, super-premium
properties. Stella Artois has a very strong collaboration within films. For instance, we are one of the
leading sponsors of the Cannes Film Festival in
France. Around the world, we have a diversity of
super-premium properties covering both sports
and leisure activities. The diversity of talent from
China, Asia and the world present at the tournament was a perfect fit for us as a brand.
CONFERENCES & EXPOS
Company index
AB InBev APAC
46
Adidas
15
All Nipon Airways
12
Alliance Boots
26
Anglo American
35
Apple
30
Arup
16
Asian Development Bank 37
Baidu
54
Bain & Co
10
Bain Capital
28
Bank of China
41, 42
Baoshan Iron & Steel
11
Barclays
38
Benelux Chamber of
Commerce
44
BHP Billiton
35, 36
Bloomberg
29
Brookings Institution 6, 29, 31
Capital Economics
36, 38
Cardinal Heath China
26
Carnegie Asia Program 29, 30
CBB International
36
CEIC
36
China Construction Bank41, 42
China Eastern Airlines
8, 11
China Gas
11
China National Biotech
Group
16
Accounting Firms
Harris Corporate Services Ltd
http://www.harrissec.com.cn
Hong Kong Head Office
7/F, Hong Kong Trade Centre
161-167 Des Voeux Road Central
Hong Kong
Tel: +852 2541 6632
Fax: +852 2541 9339
Email: [email protected]
Shanghai Branch Office
Suite 904, OOCL Plaza,
841 Yan An Zhong Road,
Jing’An District,
Shanghai, PRC
Tel: +86 21 6289 8813
Fax:+86 21 6289 8816
48
China National Offshore Oil
Corporation
7, 11
China Real Estate Index
System
11
Chinese Academy of Social
Science
29, 30, 35, 37, 39
Claremont McKenna College 7
CLSA
36, 37, 38, 39
Coalition for a Prosperous
America
29
Consulate General of
Belgium
44
COSCO
42
CRU Group
35, 36
Dynasty REIT
10
E-House China R&D Institute11
ENN Energy Holdings
11
Ernst & Young
36, 37
Evergrande Real Estate
15
Fortescue Metals Group
35
Foxconn
12
Gartner
10
Guangxi Liugong Machinery 43
Guangzhou Pharmaceuticals
Group
26
Hewlett-Packard
10
HSBC
18
Huawei
6, 7, 11, 43
Hyundai Motors
11
IHS Global Insight
37, 38
IMF
8, 11, 18
IMG
15
Industrial & Commercial Bank
of China
41, 42
International Forum on
Globalization
22
Kia Motors
11
Lenovo
10
London Metals Exchange 36
Massachusetts Institute of
Technology
22
Morgan Stanley Australia35, 38
Nanjing Pharmaceuticals 26
Netherlands Foreign
Investment Agency
43, 44
Nexen
7, 11
Nike
10, 15
Nissan
8
Oceans Marketing
15
Oxford Analytica
29
Pantheon
20
Peking University 16, 36, 37, 38
Penguin
18, 24
Pew Research Center
12
PLA National Defense
University
54
PwC
39
Razorfish
16
Guangzhou Branch Office
Room D-E, 11/F, Yueyun Building
3 Zhongshan 2nd Road
Guangzhou, PRC
Tel: +86 20 8762 0508
Fax: +86 20 3762 0543
Beijing Branch Office
Room 2302, E-Tower, No.12
Guanghua Road, Chaoyang District,
Beijing, PRC
Tel: +86 10 6591 8087
Fax: +86 10 8599 9882
LehmanBrown International
Accountants
www.lehmanbrown.com
Beijing
6/F, Dongwai Diplomatic Building
23 Dongzhimenwai Avenue
Tel: +86 10 8532 1720
[email protected]
Shanghai
1501 & 1504
Wantai International Building
480 Wulumuqi Road North
Tel: +86 21 6249 0055
[email protected]
Guangzhou
Unit 3317, China Shine Plaza
9 Linhe Road West
Tel: +86 20 2205 7883
[email protected]
Shanghai LSC Management
Consultants Co., Ltd.
www.lsccpa.com.cn
Unit I 14/F Huamin Empire Plaza,
728 Yan’an Road West, Shanghai
Tel: +86 21 5534 5190
Fax: +86 21 5212 0958
Airlines
Beijing
Air Canada Beijing Office
www.aircanada.cn
C201 Lufthansa Center, 50
Liangmaqiao Road, Chaoyang,
Beijing
Tel: 400 811 2001
Fax: +86 10 6463 0576
Lufthansa German Airlines
Beijing Office
www.lufthansa.com.cn
S101 Beijing Lufthansa Center
50 Liangmaqiao Road, Chaoyang
Tel: +86 10 6468 8838
Malaysia Airlines Beijing Office
www.malaysia-airlines.com
Rhodium Group
42, 45
Rio Tinto
35, 36
Shanghai Pharmaceuticals 26
Shanghai University of Science
and Engineering
16
Sina
54
Sinopec
11
Sinopharm
26
Stella Artois
46
The US-China Business
Council
29
Toshiba
15
Toyota
8
Tsinghua University
16
University of Michigan
31
Unocal
7
Vale SA
35
Wanda Group
15
Warwick University
16
World Bank
7, 8, 10, 11, 18
WTO
22, 29, 31
Xinhua
24
Xstrata
35, 36
Yum Brands
10
Zhejiang Dasheng Medic
26
Zoomlion
43
ZTE
11
1008B Tower B, Pacific Century
Place, 2A Gong Ti Road North,
Chaoyang, Beijing
Tel: +86 10 6505 2681
Fax: +86 10 6505 2680
Northwest Airlines Airport Office
www.nwa.com
32271 Passenger Terminal 2, Capital
International Airport
Tel: +86 010 6459 7827
KLM - Greater China Regional
Office
www.klm.com.cn
1609-1611 Kuntai International
Mansion, B12 Chaoyangmenwai
Avenue, Chaoyang, Beijing
Tel: +86 10 5922 0747
Fax: +86 10 5879 7621
Shanghai
Air France - Shanghai Office
www.airfrance.com.cn
3901B Ciro’s Plaza
388 Nanjing Road West
Tel: +86 21 6334 5702
[email protected]
Dragonair Shanghai
www.dragonair.com
2804 Shanghai Square, 138 Huaihai
Road Central, Shanghai
Co mpany ListingS
Tel: +86 21 6375 6375
KLM - Shanghai Office
www.klm.com.cn
3901A Ciro’s Plaza,
388 Nanjing Road West, Shanghai
Tel: +86 21 6334 5730
Virgin Atlantic Airways Ltd.
Shanghai Rep. Office
217 Pudong Development Bank
Building, 12 Zhongshan East No. 1
Road, Shanghai
Tel: +86 21 5353 4605
Fax: +86 21 5353 4607
Business Schools
Beijing
University of International
Business and Economics SinoFrench MBA
University of International Business
and Economics, 10 Huixin Street
East, Chaoyang, Beijing
Tel: +86 10 6449 3212
Fax: +86 10 6449 2544
Guangzhou
Institut Lingnan-Lyon III-EM Lyon
MBA en Commerce Extérieur
www.francemba.com
306 Lingnan MBA Building, Sun Yatsen University, 135 Xingang Road
West, Guangzhou, Guangdong
Tel: +86 20 8411 5503
Fax: +86 20 8411 0675
Shanghai
Fudan University - Washington
University EMBA
www.olin.wustl.edu/shanghai (English)
www.fdms.edu.cn/olin (Chinese)
Room 710, 670 Guoshun Road
Shanghai, China, 200433
Tel: +86 21 5566 4788
Fax: +86 21 6565 4103
Tongji University SIMBA
A309 Sino-French Center, Tongji
University, 1239 Siping Road
Shanghai, China
Tel: +86 21 6598 0610
Fax: +86 21 6598 3540
China Europe Int’l Business School
(CEIBS) MBA
www.ceibs.edu
Tel: +86 21 2890 5555
Fax: +86 21 2890 5200
E-mail: [email protected]
Shanghai Jiao Tong-Euromed
Management AEMBA Program
(MBA/EMBA)
www.aemba.com.cn
Tel: +86 21 5230 1598
Fax: +86 21 5230 3357
International Schools
Yew Chung International School
of Beijing
www.ycis-bj.com
Honglingjin Park, 5 Houbalizhuang,
Chaoyang District,
Beijing 100025, China
Tel: +86 10 8583 3731
Fax: +86 10 8583 2734
of Shanghai (Puxi Campus)
www.ycis-sh.com
11 Shui Cheng Road,
Shanghai 200336, China
Tel: +86 21 6242 3243
Fax:+86 21 6242 7331
of Shanghai (Pudong Campus)
www.ycis-sh.com
1817 Hua Mu Road, Pudong,
Shanghai 201204, China
Tel: +86 21 5033 1900
Fax: +86 21 6856 5907
Beijing
Beanstalk International Bilingual
School (BIBS)
6 Dongsihuanbei Road,
Chaoyang, Beijing
Tel: +86 10 5130 7951
Beanstalk International
Kindergarten (BIK)
1/F, Building B, 40 Liangmaqiao
Road, Chaoyang
Tel: +86 10 6466 9255
International School of Beijing
www.isb.bj.edu.cn
10 Anhua Street, Shunyi
Tel: +86 10 8149 2345
Western Academy of Beijing
10 Laiguangyingdong Road,
Chaoyang
Tel: +86 10 8456 4155
Healthcare
Shanghai
iKang State Guest Group Co., Ltd.
www.ikang.com
1/F Building 6, 1313 Xizang Road
South, Shanghai
Tel: +86 21 2326 5000
Fax: +86 21 2327 5102
Parkway Health Medical Centers
24 Hour Appointment and
Information Hotline
Tel: +86 21 6445 5999
www.parkwayhealth.cn
Hotels
Harrow International School
Beijing
www.harrowbeijing.cn
[email protected]
No. 5, 4th Block, Anzhenxili
Chaoyang District, Beijing 100029
China
Tel: +86 10 6444 8900
Fax: +86 10 6445 3870
Saint Paul American School
www.stpaulschool.cn
[email protected]
18 Guan Ao Yuan, Longgang Road
Qinghe, Haidian District, Beijing
100192
China
Tel: +86 137 1881 0084
Shanghai
Livingston American School
www.laschina.org
580 Ganxi Road
Tel: +86 21 6238 3511
Fax:+86 21 5218 0390
Shanghai Community International
School (Pudong Campus)
www.scischina.org
800 Xiuyan Road, Kangqiao, Pudong
Tel: +86 21 5812 9888
Fax:+86 21 5812 9000
British International School
Shanghai - Pudong Campus
www.bisshanghai.com
600 Cambridge Forest New Town,
Lane 2729 Hunan Road, Pudong
Tel: +86 21 5812 7455
Beijing
Doubletree by Hilton Beijing
www.hilton.com.cn/doubletreebeijing
168 Guang’anmenwai Avenue, Xuan
Wu, Beijing
Tel: +86 10 6338 1888
Fax: +86 10 6338 1785
Hotel New Otani Chang Fu Gong
26 Jianguomenwai Avenue,
Chaoyang, Beijing
Tel: +86 10 5877 5555
Fax: +86 10 6513 9810
Kempinski Hotel Beijing Lufthansa
Center
www.kempinski.com/beijing
[email protected]
50 Liangmaqiao Road, Chaoyang,
Beijing
Tel: +86 10 6465 3388
Fax: +86 10 6410 4080
InterContinental Beijing Financial
Street
www.intercontinental.com/icbeijing
[email protected]
11 Financial Street, Xicheng,
Beijing
Tel: +86 10 5852 5888
Fax: +86 10 5852 5999
Guangdong
Ibis Zhongshan Huangpu
www.ibis.cn
155 Xingpu Road, Huangpu Town,
Zhongshan, Guangdong
Tel: +86 760 2397 0000
Fax: +86 760 2397 0111
Hainan
Jinjiang Hot Spring Hotel
1 Jinhai’an Avenue, Qionghai, Hainan
Tel: +86 898 6277 8588
Fax: +86 898 6277 8128
Jiangsu
Courtyard by Marriott Wuxi
www.marriott.com
335 Zhongshan Road, Wuxi, Jiangsu
49
C ompany ListingS
Tel: +86 510 8276 2888
Fax: +86 510 8276 3388
Shanghai
Grand Central Hotel Shanghai
www.grandcentralhotelsh.com
[email protected]
505 Jiujiang Road, Shanghai
Tel: +86 21 5353 8888
Fax: +86 21 6351 9999
Grand Mercure Hongqiao
Shanghai
www.grandmercurehongqiao.com
[email protected]
369 Xian Xia Road
Chang Ning District
Shanghai
Tel: +86 21 5153 3300
Fax: +86 21 5153 3555
Grand Hyatt Shanghai
www.shanghai.grand.hyatt.com
[email protected]
Jin Mao Tower, 88 Century Avenue
Pudong, Shanghai
Tel: +86 21 5049 1234
Fax: +86 21 5049 1111
Okura Garden Hotel Shanghai
www.gardenhotelshanghai.com
58 Maoming Road South
Tel: +86 21 6415 1111
[email protected]
Starwood Asia Pacific Hotels &
Resorts PTE. Ltd. Shanghai Office
www.starwoodhotels.com
19/F Phase 1 Huanmao Building
999 Huaihai Road Central,
Shanghai
Tel: +86 21 6141 7799
Fax: +86 21 6391 8220
The Leading Hotels of the World,
Ltd. Shanghai Rep. Office
www.lhw.com
501A Shanghai Center, 1376
Nanjing Road West, Shanghai
Tel: +86 21 6279 8951
Fax: +86 21 6279 8952
Wings Tours & Nile Cruises
Shanghai Rep. Office
www.wingsegypt.com
1404 Yuandong Building, 1101
Pudong Road South, Shanghai
Tel: +86 21 5820 9355
Fax: +86 21 5820 8648
HR/Recruitment
Beijing
Beijing Foreign Enterprise Human
Resources Service
www.fesco.com.cn
FESCO Building,
14 Chaoyangmennan Avenue
50
Chaoyang
Tel: +86 10 8561 8888
Manpower & Standard Human
Resources (Shanghai) Co., Ltd.
Beijing Branch
[email protected]
2/F, E1 Office Building Oriental
Plaza, 1 DongChang’an Street
Dongcheng, Beijing
Tel: +86 10 8518 8816
Hudson Recruitment (Shanghai)
Co., Ltd. Beijing Branch
[email protected]
610 Tower B Xiandai City, 88
Jianguo Road, Chaoyang, Beijing
Tel: +86 10 8580 8080
Shanghai
Hudson Recruitment (Shanghai)
Co., Ltd.
[email protected]
2302-2303, 2201-2206 Hongyi
International Plaza, 288 Jiujiang
Road, Shanghai
Tel: +86 21 2321 7888
Fax: +86 10 5907 0188
Real Estate/
Serviced Apartments
Savills Residence Century Park
www.savillsresidence.com
No. 1703, Lane 1883, Huamu Road
Pudong New District, Shanghai
201203, PRC
Tel: +86 21 5197 6688
[email protected]
Language Schools
Lanson Place Central Park
Residences
[email protected]
Tower 23, Central Park
No. 6 Chaoyangmenwai Avenue
Chaoyang, Beijing 100020
Tel: +86 10 8588 9588
Fax: +86 10 8588 9599
Shanghai
Lanson Place Jin Qiao Serviced
Residences
[email protected]
No. 18, Lane 399 Zao Zhuang Road
Pudong New District, Shanghai
200136
Tel: +86 21 5013 3888
Fax: +86 21 5013 3666
Real Estate/Commercial
Jing An Kerry Centre
www.jingankerrycentre.com
Unit 901, 9F, Tower 1
Jing An Kerry Centre
1515 Nanjing Road West
Shanghai
China 200040
Tel: +86 21 6087 1515
Fax: +86 21 6087 1955
Leasing Enquiries
Tel: +86 21 6087 2499
Tel: +86 21 6087 2488
Real Estate/
Business Park
MandarinKing
www.mandarinking.cn
Shanghai
No.555 West Nanjing Road,
Room 1207 12th Floor, Plaza 555
Shanghai, China
Course Inquiry: 400 618 6685
Office Tel: +86 21 6209 1063
Office Tel: +86 21 6209 8671
[email protected]
Park View Apartment
wwww.parkview-sh.com
Block 1-4, No. 888
Changning Road
Shanghai, 200042
Tel: +86 21 5241 8028
[email protected]
PR Agencies
Ketchum Newscan Public
Relations
www.ketchum.com
Shanghai
218 Tianmu Road West
Tel: +86 21 6353 2288
Fax: +86 21 6353 2276
Beijing
A6, Chaoyangmenwai Avenue
Chaoyang
Tel: +86 10 5907 0055
Belvedere Service Apartments
www.belvedere.com.cn
[email protected]
Belvedere Service Apartments 833
Changning Road, Shanghai 200050
Tel: +86 21 6213 2222
Fax: +86 21 6251 0000
Sandhill Plaza
www.sandhillplaza.cn
2290 Zuchongzhi Rd, Zhangjiang
Hi-Tech Park, Shanghai 201203
Tel: +86 21 6075 2555
[email protected]
Shenyang
Shenyang International Software
Park
No.860-1 Shangshengou, Dongling
district, Shenyang City, Liaoning
Province, 110167
P.R.C
Tel: +86 24 8378 0500
Fax: +86 24 8378 0528
Real Estate/HOPSCA
Shanghai Jiatinghui Property
Development CO., Ltd
www.antinganting.com.cn
Life Hub @ Anting No 1033
Moyu Rd S, Anting, Shanghai
Tel: +86 21 6950 2255
Fax: +86 21 6950 2833
[email protected]
GRM: Document Storage
Media Vault Storage
Certified Destruction
Shanghai
Unit 2, Lane 271, Qianyang Road
Tel: +86 21 5270 3311
[email protected]
Beijing
6 Shuangyang Road, Beijing
Economic and Tech. Dev. Zone
Tel: +86 10 6789 2800
[email protected]
Guangdong
8 Qiufuilu District, Fumin Industrial
Park, Dalang Town,
Dongguan
Tel: +86 769 8222 9922
[email protected]
Serviced Offices
Service Providers
Shanghai
Shanghai Aurora Office Equipment
388 Jiaxin Road, Jiading
Shanghai
Tel: +86 21 5916 4588
Fax: +86 21 5990 3429
Getchee Inc.
www.getchee.com
[email protected]
D2-D3/26F, ShenYa Financial Plaza
No.895 West Yanan Rd, Shanghai
200050, China
Tel: +86 21 6439 6350 213
YouYou Space Self Storage
http://www.youyouselfspace.com
[email protected]
1/F, East Tower
800 East Guoshun Rd
YangPu District, Shanghai
Hotline: 400-680-1716
Vantone Commercial Center
www.VantoneCommercialCenter.com
Level 26 & 27, Tower D, Vantone
Center, No 6 Chaowai Ave
Chaoyang District, Beijing
Tel: +86 10 5905 5905
Shanghai
International Finance Centre
Level 8, International Finance
Center, 8 Century Avenue, Pudong
CITIC Square
Level 35, CITIC Square, 1168
Nanjing West Road, JingAn District
XinTian Di
Level 5,Xintiandi, 159 MaDang
Road, LuWan District
The Centre
Level 20,The Centre, 989 ChangLe
Road, XuHui District
Chong Hing Finance Centre
Level 12,ChongHing Finance
Centre, 288 Nanjing West Road,
HuangPu District
Tel: +86 21 6062 7183
[email protected]
Beijing
China Resource Building
Level 12, China Resources Building,
No.8 Jianguomenbei Ave.
China World Office 1
Level 14, China World Office Tower
1, No.1 Jianguomenwai Ave.
Yintai Office Centre
Level 15, Yintai Office Tower C, No.2
Jianguomenwai Ave.
Hyuandai Motor Tower
Level 17, Hyuandai Motor Tower,
No.38 XiaoyunRoad
Tel: +86 10 6535 0182
[email protected]
Guangzhou
HNA Tower
Level 10, HNA Tower, 8
LinheZhongRoad, Tianhe District
TaikooHui
Level 7-02, Tower1, TaikooHui, No.
385 Tianhe Road, Tianhe District
Tel: +86 20 2831 7172
[email protected]
Shenzhen
Tower 2, Kerry Plaza
Level 15, Tower 2, Kerry Plaza, No.1
ZhongXin Si Road, Futian District
Tower 3, Kerry Plaza
Level 13, Tower 3, Kerry Plaza,
No.1-1ZhongXin Si Road, Futian
District
Tel: +86 755 3304 3419
[email protected]
Tianjin
World Financial Centre
Level 41, Tianjin World Financial
Centre, 2 Dagubei Road, Heping
District
Exchange Tower 2
Level 29, The Exchange Tower 2,
189 Nanjing Road, Heping District
TEDA MSD
Level 17, C1 Tower TEDA MSD,
79 First Avenue, Tianjin Economic
Development Area
Tel: +86 22 5830 7859
[email protected]
Chengdu
Raffles City
Level 17, Tower 2, No. 3, Section 4,
South Renmin Rd, Wuhou District
Tel: +86 28 6511 2778
[email protected]
Apollo Business Center
Apollo Huaihai Center [New]
4/F, Fuxing Commercial Building
139 Ruijin Road (No.1)
Huangpu District
Shanghai
Tel: 021-6136-6088
Apollo Flagship Center
Apollo Building
1440 Yan’an Road (M)
Jing’an District
Shanghai
Tel: 021-6133-1888
Apollo Tomson Center
22/F, Tomson Commercial Building
710 Dongfang Road
Pudong District
Shanghai
Tel: 021-6165-2288
Apollo Xuhui Center
16/F, Feidiao International Building
1065 Zhaojiabang Road
Xuhui District
Shanghai
Tel: 021-5158-1688
Apollo Hongqiao Center
26/F, New Town Center Building
83 Loushanguan Road
Changning District
Shanghai
Tel: 021-3133-2688
Regus Business Centre
Tel: +86 400 120 1205
[email protected]
www.regus.cn
Regus Aurora Plaza
11/F, Aurora Plaza
99 Fucheng Road, Lujiazui
Pudong New Area
To have your company
featured in these pages,
please contact our
representatives at
+86 21 5385 9061
51
Econom ic ind icators
Top Domestic Listings
Packaging
Lead Underwriter
CITIC Securities
Price
Offering Amount
002701
Oct 11
RMB21.6
RMB1.66b
Auditor
Revenue
Growth (y/y)
Gross Margin
RMB2.84b
45%
24%
Halter USX China vs DJIA vs Nasdaq
4%
PwC
Zhongtian
0%
-2%
The company manufactures metal food containers with easy-open lids.
Ticker
Listing Date
Price
Offering Amount
Yonggui
Electronic Components
300351
Sep 20
RMB30
RMB620m
Lead Underwriter
Auditor
Revenue
Growth (y/y)
Gross Margin
-9%
62%
Electric
Equipment
Guotai Junan Securities Pan-China RMB190.45m
The company develops, manufactures and sells electrical connectors for use in machinery and railway
transit.
Industry
Ticker
Listing Date
Price
Sep 12
Sep 17
Sep 20
Sep 25
Sep 28
Oct 03
DJIA
Halter USX China
Oct 08
Oct 11
Nasdaq
Note: Daily change
Source: Halter USX China, Dow Jones Indexes and NASDAQ Composite, CapitalVue
Hang Seng vs Hang Seng China Enterprises
Hang Seng
Industry
Zhejiang
2%
21,500
10,400
21,000
10,200
10,000
20,500
9,800
20,000
9,600
19,500
Offering Amount
9,400
19,000
Diversified Metals &
Luan-
Mining
chuan
Lead Underwriter
Oct 9
RMB3
RMB600m
Auditor
Revenue
Growth (y/y)
Gross Margin
RMB6.1b
36%
36%
Essence Securities &
BOC International
Deloitte
Touche
Industry
Packaged Foods &
Fujian
Meats
Lead Underwriter
Sinolink Securities
Ticker
Listing Date
Price
Offering Amount
002702
Oct 11
RMB29
RMB513.3m
Auditor
Revenue
Growth (y/y)
Gross Margin
RMB658.33m
28%
31%
Fujian
Huaxing
Industry
Ticker
Listing Date
Price
Offering Amount
Systems Software
300352
Sep 12
RMB25
RMB417.5m
Lead Underwriter
Auditor
Revenue
Growth (y/y)
Gross Margin
38%
90%
VRV
China Minzu Securities RSM China RMB126.95m
The company develops and sells information security software and technical services.
Industry
Inner
Mongolia
Resistance
Sep 25
Sep 28
Construction &
Engineering
Lead Underwriter
Ticker
Listing Date
Price
Offering Amount
300355
Sep 27
RMB11.8
RMB405.45m
Donghai Securities
Auditor
BDO China
Shu Pan
Oct 05
Oct 10
Hang Seng China Enterprises
2,350
2,300
2,250
2,200
2,150
2,100
2,050
2,000
1,950
1,900
8,900
8,800
8,700
8,600
8,500
8,400
8,300
8,200
8,100
8,000
7,900
7,800
Sep 12
Sep 17
Sep 20
Shanghai Composite
Sep 25
CSI 300
Sep 28
Oct 10
Shenzhen Component
Commodities
Energy
Light sweet crude
oil (NYMEX)
Revenue
Growth (y/y)
Gross Margin
RMB499.8m
36%
32%
Contract
Date
Close (US$)
Change (%)
Nov 12
Oct 16,
2012
92.41
-4.16%
Oct 12
Oct 5
Sep 28
Newcastle coal
index (globalCOAL)
82.51
85.70
85.06
(Week-to-date
price)
Note: Change is since last month's close (US$)
Monsod
Drought-
Sep 20
Source: Shanghai Stock Exchange, Shenzhen Stock Exchange and China Securities Index, CapitalVue
The company manufactures and sells frozen fish surimi products and frozen meat products.
Software
Sep 17
Source: Hong Kong Stock Exchange, CapitalVue
Tohmatsu
Tengxin
Beijing
9,000
Sep 12
Shanghai Composite vs Shenzhen Component vs CSI 300
The company is engaged in the mining, dressing, smelting and processing of non-ferrous metals.
Foods
9,200
18,500
Hang Seng
Molybdenum Grp
603993
SH&CSI 300
Luoyang
Qinhuangdao Coal*
Sep 21
Sep 14
89.73
90.93
Date
Price for this
week (RMB)
Price for last
week (RMB)
Same Period
Last Year (RMB)
Oct 12
635-645
630-640
840-850
* 5,500 kcal/kg thermal coal
The company cultivates Inner Mongolia grass and constructs resource-efficient ecological environ-
Metals
ments in arid and semi-arid environmental areas of China.
GC Gold (COMEX)
SI Silver (COMEX)
HG Copper (COMEX)
Contract
Date
Close (US$)
Change (%)
Oct 12
Oct 12
Nov 12
Oct 16
Oct 16
Oct 16
1737.7
32.765
3.722
0.01%
-2.58%
1.81%
Source: CapitalVue
Top IPOs based on funds raised
Date: Sep 12- Oct 12
Source: CapitalVue
52
Hang Seng China Enterprises
Containers
ORG
Listing Date
Shenzhen Component
Metal & Glass
Ticker
Change
Industry
Market indexes
To receive weekly updates on initial public offerings by Chinese firms in the US, sign up for CER’s China IPO update by
emailing [email protected]
Key indicators
RMB exchange rates
Sep
2012
Aug
2012
2011
(full year)
1.9
2
5.4
Consumer price index (y/y % change)
Producer price index (y/y % change)
Retail sales (US$b)
-3.5
6.0
262.88
2,861.6
14.2
13.2
17.1
A shares
Sept 12 - Oct
Total A shares Trading Volume and
M/M
12
Turnover
Change
Volume
220.1b shares
-19.87%
Turnover
RMB1,950.64b -23.64%
*Top A Shares Gainers/Decliners for the month ending Oct 12, 2012
Company
Ticker
Change
Chang Jiang Shipping Group Phoenix
000520
49.08%
Cangzhou Dahua
600230
43.89%
Shandong Humon Smelting
002237
37.88%
Zhongyuan Special Steel
002423
37.56%
Shanghai Hanbell Precise Machinery
002158
31.34%
Jiangsu Changfa Refrigeration
002413
30.57%
Shandong Jining Ruyi Woolen Textile
002193
-29.63%
Everfine
300306
-25.20%
Shenzhen Sunshine Laser & Electronics
300227
-23.54%
Technology
Bohai Ferry
603167
-23.43%
Wuhan Tianyu Information Industry
300205
-23.35%
*Excluding IPOs
9.2
8.9
13.9
186.35
177.973
1,898.6
Exports (y/y % change)
9.9
2.7
20.3
158.68
151.313
1,743.5
2.4
-2.6
24.9
-
-
3,181.1
Imports (y/y % change)
Foreign reserves (US$b)
Foreign reserves (y/y % change)
-
-
11.7
New bank lending (US$b)
98.51
111.1
1,179.5
New bank lending (y/y % change)
32.79
28.36
-2.3
Urban fixed-asset investment
(y/y % change)
20.5
20.2
23.8
Actual FDI inflows YTD (US$b)
83.42
75.0
116.0
Quarterly GDP
GDP [US$b]
GDP growth [y/y % change]
Q312
Q2 12
Q1 12
Q4 11
Q3 11
2,005.2
1,867.1
1,692.9
2,389.1
1,819.7
7.4
7.6
8.1
8.9
9.1
Source: SAFE
Source: CapitalVue
Top investment deals
Source: National Bureau of Statistics, The People's Bank of China, CapitalVue
Date
Purchasing Managers’ Index
Domestic M&A
Shenzhen ShenSep 28
neng Energy Mgmt
PMI manufacturing
Sep 2012
Aug 2012
PMI manufacturing [overall]
49.8
49.2
New orders
49.8
48.7
Production
51.3
50.9
Employment
48.9
49.1
Supplier delivery
49.5
50
47
45.1
New export orders
48.8
46.6
Purchases
49.8
48.8
Finished goods inventory
47.9
48.2
51
46.1
Raw material inventory
Input price
Imports
47.7
47
Backlog orders
46.5
45.1
Business activity
53.7
56.3
New business
51.8
52.7
PMI non-manufacturing
New export orders
-
-
Business expectation
60.9
63.2
Input price
57.5
57.6
Source: China Federation of Logistics & Purchasing, CapitalVue
Change (%)
-0.14%
-0.95%
0.57%
-0.30%
-3.6
Industrial output growth (y/y % change)
Imports (US$b)
Sept 12, 2012
6.336
0.081
8.140
10.181
289.19
Retail sales growth (y/y % change)
Exports (US$b)
Oct 12, 2012
6.326
0.081
8.186
10.150
USD
JPY
EUR
GBP
Target
Target
sector
Acquirer
Shenzhen
Energy Grp
Hunan
Sep 28 Zhongnan Diamond Manufacturing Jiangnan Red
Arrow
7 Days Grp
Sep 26
Hotels
Investor Grp
Holdings
Taifu
Shandong Ludi
Mining
Sep 26
Industry
Mining
Hebei Jinxi
Qianxi County-Fixed
Metals
Oct 8
Iron & Steel
Assets
Inbound M&A
Guang Cheng
Oct 9
Lexing Holdings
Mining
Grp (VG)
Medtronic
China Kanghui
Manufacturing
Sep 28
(US)
Holdings
China RuiHebei Hongsong
Sep 21
feng Galaxy
Energy
Wind Power
(HK)
Outbound M&A
Haier New
Fisher & Paykel
Manufacturing
Zealand
Sep 11
Appl Holdings (NZ)
Invest Hldg
Undisclosed
Discovery Metals
Mining
Oct 3
Joint Venture
(AU)
Meijin Energy
Western Desert
Mining
Sep 18
Grp
Resources (AU)
Shandong
Focus Minerals
Mining
Gold Intl
Sep 19
(AU)
Mining
Energy
Value
(US$m)
1,670.1
673.0
394.7
198.6
116.8
907.1
731.6
123.7
998.3
959.2
347.5
238.1
Date: Sep 10-Oct 15
Source: Thomson Reuters
53
China BUZZ
“So what happens on day two?”
-Madeline Albright on Mitt Romney's plans to label China a
currency manipulator on “day one” of his presidency
“This is shaping up to be an election to select the person
who gets to apologize to China.”
–Freelance journalist Dave Pell on the US presidential elections
“Huawei, Weiwei, Weibo, Weixin – newcomers to
China must feel like they're wei in over their heads”
-Baidu spokesperson and writer Kaiser Kuo
“We are not afraid of democracy…[the absence of political reform] is
due to insufficient theoretical preparations.”
-Gong Fangbin, a professor at the PLA National Defense University
“I'm not afraid of marriage; I'm just not ready theoretically,”
-A user on Sina Weibo playing off of Gong Fangbin’s statement
“All these buildings around here is crazy. Buildings on top of
buildings everywhere."
-Mario Chalmers, a player for the Miami Heat, tweeting during a visit
to Shanghai for an exhibition game
“Maybe in 100 years.”
-Author and 2012 Nobel prize winner Mo Yan when
asked in a 2008 interview when he thought a
Chinese writer would be awarded a Nobel
Prize
Source: Bloomberg,Twitter, Twitter, WSJ, WSJ, Twitter, WSJ

Wild ride - China Economic Review

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