Posts tagged ‘Hong Kong’

25/11/2014

# Chinese overseas acquisitions / investments – 25 November 2014

#          “China’s outbound direct investment is for the first time set to exceed investment into the country, highlighting the ongoing shift of global economic influence to the east.” – FT.com, 22 Oct, 2014 – http://www.ft.com/cms/s/0/28f6b8d4-59cd-11e4-9787-00144feab7de.html#axzz3JzPW4Z3o

#          “Chinese enterprises completed a record 176 mergers and acquisitions (M&A) overseas in the first nine months of 2014, up 31 percent year-on-year, according to a report released by accounting firm PwC on Monday.

Among them, private enterprises completed 120 M&A transactions, more than doubling the number carried out by state-owned enterprises and making them the major force in the M&A market, according to the report.” – China Daily, 22 Oct 2014 – http://usa.chinadaily.com.cn/business/2014-10/27/content_18809601.htm

#          “The theme of outbound China M&A has changed. State-owned enterprises are no longer the only buyers going overseas, private companies in industries like consumer and technology have started doing high-profile acquisitions on the global stage in recent years,” said Stephen Gore, Asian-Pacific head of mergers and acquisitions at Bank of America Merrill Lynch.” – WSJ, 21 Sept, 2014 – http://online.wsj.com/articles/chinese-overseas-buying-increasingly-shifts-to-private-from-state-1411335001

#          There are five kinds of Chinese overseas investments (or at least JVs) – which are not mutually exclusive – in rough order of priority:

  • Natural resources: oil and gas serving a growing need:
    • Chesapeake Energy – Sinopec(July 2013)
    • Wolfcamp shale exploration – stake by Sinochem (Jan 2013)
    • Pre-August 2012:
      • Oil and gas: (Sinopec, CNOOC and PetroChina have all been very active in several continents, including North America – Nexen, Canada),
      • coal, steel, minerals (incl Australia’s Sundance),
      • arable land (parts of Africa and South America).
  • Infrastructure and other tangibles which are ‘safer’ than holdings of US or Euro bonds and provides relatively predictable yields; they often also provide technology transfer at no additional cost:
    • Salov – Bright Foods( Oct 2014)
    • Tnuva – Bright Foods( May 2014)
    • AMC Entertainment cinemas – Wanda(Sept 2012)
    • Weetabix – Bright Foods(May 2012)
    • Smithfield Foods – Shuanghui Foods (May 2013)
    • Pre-August 2012:
      • manufacturing plants (Putzmeister),
      • oil refineries (INEOS’ Grangemouth (Scotland) and Lavéra (France),
      • utilities (Redes Energeticas Nacionais, Energias de Portugal, Thames Water; Brazilian electricity grid, Northumbrian Water), office blocks (Canary Wharf, London),
      • housing in the US;
      • construction – Spanish construction company; all sorts in parts of Africa and the Caribbean (sports stadium, holiday resorts, roads, ports, etc).
  • Technology: esp new and innovative building for the future:
    • Motorola – Lenova (Jan 2014)
    • Pre-August 2012:
  • Brands: especially luxury brands which reduces the outflow of currency and increases the inflow as the population gains affluence and demand for luxury goods continue to expand:
    • Waldorf Astoria – Anbang Insurance(June 2014)
    • Corum watches – Wanda (April 2014)
    • Pre-August 2012:
      • yachts (Ferretti),
      • high fashion (Cerruti, Sonia Rykiel),
      • essentials (Putzmeister);
      • soccer (Inter Milan).
  • Financial houses, esp owners/managers of funds (BlackRock) – which are not as ‘safe’ as resources and tangibles, but much safer that Euro and $ bonds.

 

07/11/2014

Myopia: Losing focus | The Economist

SPARKLY, spotted or Hello Kitty: every colour, theme, shape and size of frame is available at Eyeglass City in Beijing, a four-storey mall crammed only with spectacle shops. Within half an hour a pair of prescription eyeglasses is ready. That is impressive, but then the number of Chinese wearing glasses is rising. Most new adoptees are children.

In 1970 fewer than a third of 16- to 18-year-olds were deemed to be short-sighted (meaning that distant objects are blurred). Now nearly four-fifths are, and even more in some urban areas. A fifth of these have “high” myopia, that is, anything beyond 16 centimetres (just over six inches) is unclear. The fastest increase is among primaryschoolchildren, over 40% of whom are short-sighted, double the rate in 2000. That compares with less than 10% of this age group in America or Germany.

The incidence of myopia is high across East Asia, afflicting 80-90% of urban 18-year-olds in Singapore, South Korea and Taiwan. The problem is social rather than genetic. A 2012 study of 15,000 children in the Beijing area found that poor sight was significantly associated with more time spent studying, reading or using electronic devices—along with less time spent outdoors. These habits were more frequently found in higher-income families, says Guo Yin of Beijing Tongren Hospital, that is, those more likely to make their children study intensively. Across East Asia worsening eyesight has taken place alongside a rise in incomes and educational standards.

The biggest factor in short-sightedness is a lack of time spent outdoors. Exposure to daylight helps the retina to release a chemical that slows down an increase in the eye’s axial length, which is what most often causes myopia. A combination of not being outdoors and doing lots of work focusing up close (like writing characters or reading) worsens the problem. But if a child has enough time in the open, they can study all they like and their eyesight should not suffer, says Ian Morgan of Australian National University.

Yet China and many other East Asian countries do not prize time outdoors. At the age of six, children in China and Australia have similar rates of myopia. Once they start school, Chinese children spend about an hour a day outside, compared with three or four hours for Australian ones. Schoolchildren in China are often made to take a nap after lunch rather than play outside; they then go home to do far more homework than anywhere outside East Asia. The older children in China are, the more they stay indoors—and not because of the country’s notorious pollution.

via Myopia: Losing focus | The Economist.

07/11/2014

China vs. India? It’s India by a Nose, Roubini Says – Businessweek

Nouriel Roubini is an India optimist. The country may have spent years lagging behind fast-growing Asian neighbors, such as China, but the NYU professor and chairman of Roubini Global Economics sees a role switch ahead, he told Bloomberg Television today.

Nouriel Roubini: Indian Tortoise Will Soon Pass Chinese Hare

Economic growth in China, weighed down by an aging population and an obsolete investment-driven economic model, is going to fall to 6.5 percent next year and will drop below 6 percent in 2016, “while in India, with the right reforms, it could go to 7 percent,” he said. “So for the first time ever the tortoise becomes the hare and the hare becomes the tortoise.”

China’s leaders know the problems they face, according to Roubini, who is visiting Hong Kong for a Barclays-sponsored conference, but so far they have been reluctant to follow through on promises to address them. “The Chinese understand their growth model is unsustainable—too much fixed investment, not enough consumption,” Roubini said.

via China vs. India? It’s India by a Nose, Roubini Says – Businessweek.

29/10/2014

Suspect Export-Import Numbers Undermine China’s Economic Data – Businessweek

The numbers don’t match. In September, China exported $37.6 billion to Hong Kong, according to government data compiled by Bloomberg. For the same month, Hong Kong’s government  says imports from the mainland amounted to only $24.1 billion. That’s this year’s biggest gap between Chinese and Hong Kong figures.

The Kwai Tsing Container Terminals in Hong Kong on April 28

Where did all those billions of dollars go? Julian Evans-Pritchard, Capital Economics’ China economist, called the results “very suspicious,” especially since the discrepancies are largely related to the trade of precious metals and stones. “It seems the Chinese customs are basically overvaluing these gems [and] these precious metals,” he told Bloomberg Television on Tuesday. Meanwhile, “Hong Kong customs are valuing them more accurately.”

The China-Hong Kong discrepancy is just one example. Evans-Pritchard points to similar discrepancies regarding Chinese imports from South Korea. “What appears to be happening [is] we have some round-tripping,” he said. Companies may be claiming to import the stones from Korea at a certain price and then export them to Hong Kong at a higher price, pocketing the difference. That helps companies evade Chinese government currency controls at a time when there’s renewed pressure to strengthen the yuan. With such conditions, “it makes a lot of sense” for Chinese companies to borrow money cheaply abroad and find ways to get that money into the country.

The Chinese government is not blind to the problem. China has found almost $10 billion in fraudulent trades nationwide since April of last year ,and companies have “faked, forged, and illegally re-used” documents for exports and imports, Wu Ruilin, a deputy head of the State Administration of Foreign Exchange’s inspection department, told reporters in Beijing in September.

The faked invoices are additional reasons not to take at face value the economic statistics coming from China. “This is definitely another important piece of evidence of over-invoicing exports to Hong Kong to facilitate money inflow into China,” Shen Jiangugan, chief economist at Mizuho Securities Asia, told Bloomberg News. “So we shouldn’t be too optimistic about recent export data from China.”

via Suspect Export-Import Numbers Undermine China’s Economic Data – Businessweek.

22/10/2014

Airbus Helicopters expects China to become biggest market by 2020 | Reuters

Airbus Helicopters, the world’s largest civil helicopter maker, expects China and Hong Kong to become its biggest global market within six years as Beijing starts to lift restrictions on the use of low altitude airspace from 2015.

A general view of an EC145 helicopter being assembled at the Airbus production facility in Donauwoerth, Southern Germany October 9, 2014.    REUTERS/Michaela Rehle

The Airbus Group NV’s (AIR.PA) helicopter division expects to increase its annual sales in China to 150 units by 2020 from around 30-40 helicopters now, its China president Norbert Ducrot told Reuters.

Sales in the United States, the firm’s biggest market, average around 120-150 aircraft per year.

“The China market is very small with a big potential,” Ducrot said in an interview in Beijing. “I am pretty sure around 2020, China will be the first market for Airbus Helicopters.”

“Before (our customers) were mostly state companies, police and fire fighting, but now we can see the emergence of civil private helicopter operators,” he added.

China simplified flight approval procedures for private aircraft late last year, but the fledgling market for helicopters and small aircraft has been constrained by the military’s control of low altitude airspace.

A dearth of small airports, maintenance facilities, mechanics and pilots have also hampered the sector’s growth.

Ducrot said he expects demand for helicopters and small aircraft to pick up gradually when China starts to open up its low altitude airspace next year.

As infrastructure improves and the military opens up more airspace by 2020, Ducrot estimates there will be 50,000 helicopters in China over the next 30 years. There are only about 330 helicopters currently in operation in China, including Hong Kong.

via Airbus Helicopters expects China to become biggest market by 2020 | Reuters.

19/10/2014

China’s Workers Are Getting Restless – Businessweek

China does not have large independent labor unions, yet the world’s second-largest economy has witnessed an increasing number of worker strikes over the past year.

Police guard outside the Yue Yuan shoe factory after workers returned to work in Dongguan, China on April 28 following a two-week strike

According to an Oct. 14 report from the Hong Kong-based watchdog group China Labour Bulletin (CLB), the number of strikes and worker protests in the third quarter of 2014 was double the number of labor actions recorded in the same period last year: From July to September this year, the watchdog group recorded 372 strikes and worker protests across China, compared with 185 incidents over those months last year.

What’s more, the habit of organizing collective action—often through social media—is spreading beyond China’s traditional manufacturing hub of southern Guangdong province. While the number of strikes in Guangdong province has remained roughly the same, unrest has intensified in inland China. In 2013, Guangdong accounted for 35 percent of recorded labor actions vs. 19 percent this year.

Half of all recorded worker strikes and protests arose from disputes over late or unpaid wages—perhaps symptoms of economic troubles hitting manufacturers as well as tightening credit in China, according to CLB.

Also notable is the uptick in strikes led by construction workers, from just four demonstrations last summer to 55 this summer. Amid a slumping housing market, new home prices in August tumbled in 68 of 70 Chinese cities monitored by the government. As the CLB report explains, “Developers are saddled with declining sales, weaker credit availability, and continued pressure from local governments to buy land. In these situations, it is the construction workers who are always the last to be paid.”

China’s only official union is the government-linked All China Federation of Trade Unions, which lacks credibility with most workers. To date, it has only ever formally leant support to one worker strike, according to records reviewed by the liberal American Prospect magazine. Yet Chinese workers are increasingly organizing within their individual workplaces to press for higher wages, timely payments, and social security benefits. So far, these individual strikes have not coalesced into a broader, coordinated movement, which almost certainly would incur a speedy government crackdown.

via China’s Workers Are Getting Restless – Businessweek.

19/10/2014

Made in Vietnam Looks Better and Better for Chinese Shirt Maker – Businessweek

In May, a long-simmering territorial dispute between China and Vietnam turned particularly hot. With Chinese and Vietnamese ships confronting one another in the South China Sea (known in Vietnam as the Eastern Sea), Vietnamese protesters furious with China went on a rampage at home. They attacked companies with Chinese workers or Chinese names, including businesses that were owned not by mainlanders but by companies from Taiwan or other places in Asia.

A TAL Apparel employee at the company’s factory in Hong Kong

Despite worries that the anti-Chinese violence would hurt Vietnam’s ability to attract investment dollars from overseas, the unrest hasn’t dissuaded a major Hong Kong-based manufacturer from making Vietnam its top focus for growth. TAL Group is one of the world’s biggest producers of menswear, selling shirts to brands such as Brooks Brothers, L.L.Bean, Eddie Bauer, and Burberry (BRBY:LN). One out of every six dress shirts sold in the U.S. comes from a TAL Group factory, the company says. Today, Vietnam accounts for only 12 percent to 15 percent of its production, but in two years that percentage should grow to 25 percent, according to TAL Chief Executive Officer Roger Lee.

The company’s commitment to Vietnam isn’t limited just to making garments. TAL is also investing in a new business to make textiles in the country. “We believe in Vietnam,” Lee says.

via Made in Vietnam Looks Better and Better for Chinese Shirt Maker – Businessweek.

04/10/2014

Meet the Hong Kong teenager who’s standing up to the Chinese Communist Party

Joshua Wong Chi-fu is Hong Kong’s most prominent pro-democracy student leader.

Political movements often conjure images of passionate university-goers championing progressive views they learned on campus. But the long, storied history of Hong Kong’s student-led political movements is taking a different turn: The most prominent student leader of the territory’s pro-democracy protests is only 17 years old.

Sporting heavy black glasses and a bowl cut, Joshua Wong Chi-fung doesn’t exactly cut a menacing figure. But his activism against what many in Hong Kong perceive to be the Chinese Communist Party’s encroachment onto their freedoms has already attracted Beijing’s attention. Mainland authorities call him an “extremist.” A party document on national security identifies Wong by name as a threat to internal stability. Pro-Beijing newspapers in Hong Kong, meanwhile, accuse him of working for the US Central Intelligence Agency to infiltrate Hong Kong schools. (Wong denies the charges.)

Joshua Wong’s fight against ‘brainwashing’

Wong got his start in 2011, when he and fellow students founded a group called “Scholarism,” which they thought was catchier than the direct translation of the Chinese, meaning “scholarly trends.” Wong and Scholarism rose to prominence in 2012, when the Hong Kong government tried to roll out Communist Party-approved “patriotic” education in Hong Kong’s public schools, to replace civics classes. The curriculum included textbooks like one titled “The China Model,” which characterised China’s Communist Party as “progressive, selfless and united,” and criticized multi-party systems like Hong Kong’s while avoiding major (unflattering) events – notably, the Great Leap Forward, the Cultural Revolution and the Tiananmen Square massacres of 1989 – reports the New York Times (paywall).

One Hong Kong journalist likened the move to a Trojan horse that dissolved Hong Kong’s identity; Wong called it “brainwashing,” an attempt to require students to “develop an emotional attachment to China,” as he put it in this video by the South China Morning Post (paywall). In Sep. 2012, Wong and Scholarism mobilized more than 120,000 people to demonstrate (paywall) against the education programme, including a slew of students who went on hunger strike. Within days, the Hong Kong government scrapped the plan for mandatory implementation.

Wong’s next battle: ‘universal suffrage’

But Wong and Scholarism knew that as long as Hong Kong lacks representative government, both the education issue and the Chinese government’s failed 2003 attempt to impose US Patriot Act-style rules on Hong Kong would eventually resurface. So they began researching the controversy that’s now galvanising the Umbrella Revolution: universal suffrage.

This issue is really confusing – and, as even Wong admits, “really boring.” The background goes something like this: Hong Kong is governed by what’s called the Basic Law, which legal scholars from the then-British colony and the mainland wrote up prior to the 1997 handover. The law promises Hong Kong a “high degree of autonomy” until 2047 (after which, it is assumed, it will merge with the People’s Republic of China for good). It also indicates, although vaguely, that the ultimate objective is for the chief executive and the congress to be elected by universal suffrage by Hong Kong’s seven million people.

That’s not how it is at the moment. Hong Kong’s chief executive is currently chosen by an “election committee” made up of 1,193 members selected to represent “functional constituencies,” such as business and labor groups. Beijing controls who is on the committee, and, in turn, whom the committee elects; the committee also decides who runs. Ultimately, since the Chinese government still has to officially “appoint” the chosen candidate, it has veto power over the chief executive.

In 2007, the National People’s Congress, China’s legislature, promised that by 2017, Hong Kong’s chief executive “may be implemented by the method of universal suffrage.” Some in Hong Kong read that to mean by 2017, they’d have fully democratic elections. But the NPC, evidently, had something else in mind: that each and every Hong Kong citizen would be allowed to vote – but only for one of three candidates selected by the (Communist Party-picked) “electoral committee.”

via Meet the Hong Kong teenager who’s standing up to the Chinese Communist Party.

03/10/2014

Hong Kong protests: No exit | The Economist

IT IS a challenge unlike anything Chinese leaders have seen since Tiananmen Square in 1989; a city roiled by days of unauthorised protests led by students demanding democracy. On October 1st, the 65th anniversary of Communist rule in China, anti-government demonstrations in Hong Kong, which had begun nine days earlier with class boycotts, swelled to include well over 100,000 people. Protesters, conveniently armed with the umbrellas that have become their rallying symbol, endured downpours of rain to jeer the territory’s leader, Leung Chun-ying, as he presided over the raising of the national flag. A few raised their middle fingers towards it.

The “umbrella revolution”, as the movement has been dubbed, is the nightmare Communist Party leaders in Beijing have long feared from Hong Kong and the “one country, two systems” arrangement it has enjoyed since its handover from Britain in 1997. It is the first large-scale student-led protest for democracy to erupt in any Chinese city since 1989. And it presents unusual challenges. The authorities in Hong Kong are reined in by a legal system bequeathed by the British; they cannot, as officials commonly do in mainland China, handle unrest with a combination of astute bargaining, thuggish violence, ruthless treatment of ringleaders and tight controls over media and the internet. Xi Jinping, China’s president, is constrained by a desire to keep Hong Kong stable and prosperous: a botched response could badly damage one of the world’s wealthiest economies and China’s image.

But if the protests continue far beyond the public holiday on October 1st and 2nd, leaders in Beijing will doubtless become impatient for tougher action. On October 1st the party’s newspaper, the People’s Daily, called on Hong Kong residents to support “resolute” action by the police against the demonstrators, who it said would “reap what they have sown”. The party does not want Hong Kong’s protests to fan dissent elsewhere. Chinese censors on the mainland have been working hard to make sure they do not (see article). So too have China’s police, who have rounded up dozens of activists on the mainland for expressing sympathy with the protests. Some tour groups have reportedly been denied permits to go to Hong Kong on their usual shopping extravaganzas. Despite the party’s efforts, however, news of Hong Kong’s defiance is spreading in China.

The protesters’ main demand is that the people of Hong Kong be allowed to vote for any candidate of their choosing in elections for the post of chief executive in 2017 (the first in which citizens would have such a vote). Mr Xi has made clear he does not want any Western-style democracy within China’s borders. The current election plan, which China proposed on August 31st, calls for candidates to be screened by a committee stacked with party supporters.

Several protest movements have converged to challenge this. Until recently the best-known was Occupy Central with Love and Peace, which is modelled on Occupy Wall Street and named after an important business district in the heart of Hong Kong. But even Occupy Central’s leaders, who teach at local universities, wondered whether they could muster meaningful numbers. Then came the students, both from universities and schools, thousands of whom began boycotting classes on September 22nd. On the evening of September 26th the police inflamed their passions by arresting Joshua Wong, the 17-year-old leader of a movement called Scholarism, which two years ago led successful protests against an effort to introduce party-backed “patriotic” teaching in schools. Mr Wong was released on September 28th, but in the early hours of that day Benny Tai, one of the leaders of Occupy Central, announced that its protest, which had been scheduled for October 1st, would begin immediately.

via Hong Kong protests: No exit | The Economist.

02/10/2014

Hong Kong’s protests: A tough test for China’s leaders | The Economist

IT IS a most unusual sight on Chinese soil, and most unsettling for leaders in Beijing. On September 28th and 29th tens of thousands of demonstrators surrounded government offices and filled major thoroughfares around Hong Kong, braving rounds of tear gas from riot police to call for democracy and demand the resignation of Leung Chun-ying, the territory’s Beijing-backed chief executive. One image broadcast and shared around the world, of a lone protester holding his umbrella aloft in a cloud of tear gas (pictured above), has given the non-violent protests a poetic echo of “tank man” from the crackdown at Tiananmen Square in 1989.

Umbrella man

It also captures precisely what Communist Party leaders in Beijing fear from Hong Kong and its special status under the “one country, two systems” arrangement it has enjoyed since the territory’s handover from Britain in 1997. Not only are its people willing (and allowed by law) to challenge their government openly, but they also could become an inspiration for protests elsewhere in China. The spread of news and images of the protests has been blocked or heavily censored on the mainland, but as the protests carry on, the risk of contagion rises. In that sense this marks one of the most difficult tests of Chinese rule since Tiananmen.

Compounding the difficulty is the lack of a middle ground. The protesters’ main demand is that the people of Hong Kong be allowed to vote for any candidate of their choosing in elections for the post of chief executive in 2017 (the first in which citizens would have such a vote). President Xi Jinping has made clear he will have nothing resembling full Western democracy within China’s borders. The current election plan, put forward by the central government on August 31st, gives the central government an effective veto over nominees to ensure that Hong Kong remains firmly under its control.

Several protest movements have converged to challenge that control. Until recently the best-known movement had been Occupy Central with Love and Peace, which is modelled on Occupy Wall Street and named after an important business district at the heart of Hong Kong. But even Occupy’s leaders wondered whether they could muster meaningful numbers.

The biggest drivers of these protests have been university students and secondary school students, thousands of whom boycotted classes last week. On the evening of September 26th the leader of the secondary school students, 17-year-old Joshua Wong of Scholarism, was arrested—a move that, along with the use of pepper spray by police, was credited with swelling the popularity of the protests over the weekend (Mr Wong was released on Sunday). In the early hours of September 28th Benny Tai, one of the leaders of Occupy Central, announced that its protest, which had been scheduled for October 1st, China’s national day holiday, would begin immediately.

Mr Leung has shown no sign of bending. On the afternoon of September 28th, at a press conference held inside the government headquarters while thousands of protesters surrounded the building, Mr Leung repeated his endorsement of the election plan. It calls for chief executive candidates to be screened by a committee stacked with Communist Party supporters (he was elected by a similar committee in 2012, collecting 689 votes along with the derisive nickname “689”). Mr Leung acknowledged that the plan may not have been the “ideal” that some wanted, but he called it progress nonetheless. He said it had given Hong Kong citizens the “universal suffrage” they had been promised. Mr Leung said he welcomed “rational” dialogue but that the government would be “resolute” in dealing with the “unlawful” demonstrations. Asked whether the Chinese army would ever be used, Mr Leung expressed his confidence in the police. The tear gas canisters began flying shortly afterward, surprising protesters who exclaimed variations of “are you kidding?” and “shame on you”. Many donned goggles and unfurled umbrellas to protect themselves against the gas, while some raised their hands and yelled, “don’t shoot”. The protests did not become violent, but they grew and spread to other areas. The calls for Mr Leung’s resignation became louder.

via Hong Kong’s protests: A tough test for China’s leaders | The Economist.

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