|
|
Fiducia Management Consultants
|
|
|
China
Focus |
 |
|
NEWS from our
offices in Beijing · Hong Kong · Shanghai · Shenzhen |
| |
IN THIS ISSUE
|
|
|
13.
NOVEMBER 2001
|
|
|
Stability
above all
To
ward off unrest and social instability the Chinese government tends to slow
the pace of the reform process when needed. Now two policies will be shifted
- one halting the sale of shares in state owned enterprises on the domestic
stock market and the other ordering a virtual freeze on the bankruptcy of
larger state enterprises. This indicates that China is backing away from
some of the most crucial aspects of its reform agenda. This change in
policies is important because it affects the most fundamental economic
reform - the task of transforming around 300,000 mostly inefficient,
overstaffed state owned enterprises (SOEs) into modern companies which can
compete in international markets. SOEs use about two-thirds of the country's
credit resources and employ 55% of urban workers. In anticipation of a
tough economic year, the supreme court has ordered provincial courts not to
take on any bankruptcy cases of companies with assets worth more than
Rmb50m (US$6m) which covers most large and medium sized SOEs. Moreover a
researcher at the Chinese Institute for Restructuring the Economic
System unveiled plans to redouble efforts to merge strong state owned companies
with their weaker counterparts to create conglomerates like South Korea's
Chaebol and Japan's Zaibatsu. There are worries that one day China will be
saddled with the type of inefficiencies that symbolize some of the
largest Japanese and Korean companies. The developments reflect that although Beijing is
sincere in abiding by its WTO promises, domestic issues weigh heavily on
their decision making.
Fortis obtained China-wide
insurance license
Fortis,
a Belgian-Dutch financial service group has obtained a license for life insurance for the whole of China,
while its foreign competitors are limited to specific regions, mainly Shanghai and Guangzhou. Fortis
paid US$88 million for a 24.9% stake in
Tai Ping Life and plans to expand its shareholding to at least 49%,
dependent upon China's legal developments. Tai Ping Life is one of six life insurance
companies with a national-wide license and is part of the China Insurance
Group. The transaction is still awaiting approval from the Chinese
authorities. The acquisition is a major move. Six
European competitors like Allianz recently got licenses for the Chinese
insurance market - four for life insurance business and others for key
sectors including property insurance. The firms will have to find Chinese
joint venture partners and are limited to certain regions. But some foreign
companies, however, are treated differently: Whilst US companies AIG and
Chubb operate wholly owned companies (with limited business scope) others
have to contend with a maximum of 50% shareholding, even though the WTO
accession was supposed to grant equal status. The China life insurance and
medical insurance markets are expanding rapidly and the state media has
reported that total insurance premiums last year were close to US$20bn and
are expected to double by 2005.
Beijing
boosts Hong Kong firms ?
China's
Foreign Trade and Economic Cooperation Minister Mr. Shi Guangsheng recently
offered Hong Kong firms incentives to invest in the capital. In expectation
of easy capital and a comprehensive transfer of knowledge
red tape will be cut and regulations relaxed, the Minister said. Financial
deals offered by the Municipal Government are meant to encourage Hong Kong
firms to bid for some of the US$13.7 billion worth of 2008
Olympic Games projects which Beijing has ready for tender. Beijing Mayor Liu
Qi told Hong Kong businessmen they would be given the same treatment as
domestic counterparts if they entered into joint ventures in the city.
Moreover the plan would involve better lending rates from Beijing's banks
and more favorable treatment than that extended to foreign investors, SAR
authorities say. However, Chinese officials
have stated that the recently unveiled incentives did not represent a fundamental change in the country's foreign investment policy and
denied claims that SAR companies would be placed on a equal footing with
local businesses at the expense of their foreign rivals. These measure may
be meant to support Hong Kong's weakening economy. Lets wait and see.
Sourcing
up the value chain in China
Foreign
invested enterprises (FIEs) are looking for increasingly competent Chinese
companies when it comes to sourcing sophisticated products in China. One of
the industries which best reflects this growing trend is the automotive
sector. "The mainland is likely to emerge as one of the world's key
suppliers of auto parts and accessories", Gan Zhihe, an official
at the Chinese State and Economic & Trade Commission, said recently. This
has been confirmed in a South Korean study cited by the Shenzhen Shangbao
(Shenzhen Business News), which ranked mainland China eighth in world auto
production in 2000, with a total volume of 2 million units. In addition most
all
world-famous makers of parts and accessories have established factories or
marketing subsidiaries on the mainland. A
good example is Jiangyin Mould Plastics Group, established in 1984 and now
owning 17 enterprises. Jiangyin is at the foremost position in the molded plastics sector, manufacturing bumpers for the Shanghai VW Santana 2000 and
the Shanghai GM Buick. This has incurred a RMB 200 million investment, to
constantly upgrad its state-of-the-art production lines, which is necessary to meet the
demands of its SVW and SGM customers. Baosteel Group Corp, mainland China's
largest steel producer, currently supplies more than 90% of steel to auto
manufacturers in China. Among the major customers are Shanghai VW and
Honda's plant in Guangzhou. Baosteel is also actively working
towards becoming a major exporter of quality auto steel sheets, and recently
exported 750 tons to Italian car maker Fiat. A representative from Baosteel
said: "If this cargo is satisfactory, Fiat is bound to purchase 200,000
tons of auto steel sheets from us annually over the next few years."
The positive developments are a result of the role now being played by
Chinese parts suppliers. Siemens and Bosch are examples of FIEs
from other sectors for which local sourcing is a hot topic, which more and
more FIEs are sure to be discussing.
Bayer
follows BASF's heavy investments
Bayer has signed a US$ 450million investment deal with its local partner
Shanghai Chlor Alkali. They have agreed to build a new plant for the production
of poly-carbonates in the Caojing chemical park (Greater Shanghai) - the biggest
in Asia. By 2008 the pharmacy giant plans to invest US$3.4billion in
China with main focus on new production plants in the Caojing area. Bayer's German competitor BASF and the American Huntsman
Corp. are committed to jointly establishing a US$ 1billion polyurethane production
plant in the immediate neighborhood. These developments show the confidence
German chemical companies have in China. Recently BASF, one of the world's
leading chemical producer launched an integrated chemical plant project in Nanjing.
The project, co-funded by China Petroleum and Chemical Corporation (SINOPEC),
will entail US$ 2.9 billion investment, each sharing a 50% stake.
German
Engineering
prospects in China
The
German Industry Association for Machine and Plant Engineering (VDMA) went
through the Asia/Pacific region with a fine tooth-comb. Tenor: The
substantial export gains in 2000 cannot continue this year.
Therefore the association is paying particular attention to the Chinese market.
China has replaced Japan as the most important market in Asia for German
engineering. For the next years even better prospects are perceived for China.
As a result of China's WTO accession, additional plant investment is expected
to upgrade products and infrastructure. In 2000, Germany delivered machines worth US$ 2,2bn to China and increased this
by a further 58% in the first quarter of this year. Machine exports for the textile
industry, woodworking, mining and conveyor systems grew exceedingly. China's import of
printing machines doubled despite high import duties. China is designated to
become the worlds largest paper consumer by 2010. Hence the VDMA expects an
above average growth in this section. German suppliers perform very well
compared to rivals from USA, Japan and other countries especially in the
fields of aviation technology, tool machinery, construction and construction materials
machinery.
Top
Chinese executives recognised internationally
In October, Mary Ma was ranked by Fortune
magazine as the 3rd out of the 50 most powerful women outside the USA. She is
one of the brains behind Legends transformation from a small state-owned
enterprise into Chinas most recognised private corporation. Ms. Ma, educated in
Beijing, joined Legend in 1990,
six years after it was founded. Now, based in Hong Kong, she has overseen the
successful listing of Digital China (the foreign-brand distribution arm of
Legend), been a prime mover in the planning of the strategic alliance with
AOL, and part of the team pushing Legend into the export market. Fortune's recognition is of significance as it shows how individual Chinese executives
working for Chinese companies are making an impact internationally. In
addition to their own successful business performance, they draw attention to the strong
development of professional talent in China.
|
| |
| |
NEWS IN BRIEF |
|
Taiwan
scraps 50-year China investment and trade ban
Taiwan
has lifted a 50-year ban on direct trade and investment in China on the eve
of the two economies joining the WTO. Taiwanese Business can now invest
directly in the mainland. In the past Taiwan business had to channel trade
and investments through third countries, i.e. Hong Kong. The cabinet also approved a law which will scrap a US$50
million ceiling on individual investments in China and which allows offshore units
of Taiwan banks to remit money to and from the island. It is expected that
after the liberalisation the direct trade and investment between China and
Taiwan will take away some of Hong Kong's transit trade.
Foreign
investment in China booms
In
the first nine months of 2001 foreign direct investment (FDI) in China has
surged 20.7%. The Ministry of Foreign Trade and Economic Co-operation said
that China, as the fastest growing economy in Asia (7.8% this year) has
attracted direct investment of US$ 32.3bn in the period. This FDI boom in
China has been supported in the past by up anticipation of China's WTO
entry. Contractual investment, which includes future commitments, rose
30.4% to $ 49.3bn.
Siemens
mobiles in China exceed one million
Mobile phone production is the problem child of Siemens AG -
with the exception of China. Siemens Shanghai Mobile Communications Ltd.(SSMC), a German - Chinese
joint venture, has recently exceeded one million production barrier
of mobile at its Shanghai plant, the CFO Joachim Rutzen said. In
October the ten
assembly lines were extended by two additional lines.
As a result the output is expected to rise to approx. 1.5 million units by
the end of the
year. At the moment the major part of production is for the Chinese market,
but Mr. Rutzen signalised an intention to increase the export ratio by up to two
thirds of the total production in Shanghai. China presently has 125
million mobile users , 40 % up on the previous year. Only a tenth of the
Chinese population owns a mobile phone, showing the potential for further growth
in this market.
|
| |
| |
IMPRESSUM
|
|
For previous Issues
please visit
www.fiducia-china.com
Publisher
Fiducia Management Consultants
eMail:Contact@fiducia-china.com
Beijing Rep. Office
Unit 0603, Landmark Tower 2,
Chaoyang District,
100004 Beijing, P.R.China
Tel: (+86) 10 6590 6108
Fax: (+86) 10 6590 6109
Hong Kong:
22/F Fortis Bank Tower
77 Gloucester Road, Hong Kong
Tel: (+852) 2523 2171
Fax: (+852) 2810 4494
Shanghai Rep. Office:
Suite 1103, East Tower,
China Merchants Plaza,
No. 333 Chengdu Road (N),
200041 Shanghai, P.R. China
Tel: (+86) 21 5298 1805
Fax: (+86) 21 5298 1807
Shenzhen Rep. Office:
Suite 1705-06, Top Office,
Glittery City, No. 3027,
Shennan Zhong Lu,
518033 Shenzhen, P.R.China
Tel: (+86) 755 328 9958
Fax: (+86) 755 328 9959
This Newsletter is based on information obtained from sources (government, business
associates, companies, publications etc.) believed to be reliable. However Fiducia
Management Consultants does not make representations as to its accuracy,
completeness or correctness.
|
|
To unsubscribe, mail to newsletter@fiducia-china.com
Copyright © 2001 Fiducia Management Consultants.
All rights reserved.
|
|
