China’s Hong Kong to ink FTA with ASEAN by 2016


China’s Hong Kong Special Administrative Region is expected to sign a free trade agreement ( FTA) with the Association of Southeastern Asian Nations (ASEAN) by 2016, Chief Executive Leung Chun-ying said on Sunday.

Speaking on the sidelines of an ASEAN summit, Leung said Hong Kong could play the role of a “good connector” in trade and economic activities between the Chinese mainland and ASEAN members, and some trading was settled via the Hong Kong SAR.

“The Hong Kong-ASEAN FTA negotiation has been going on since last year,” Leung said. “We hope to wrap up the negotiations with all ASEAN nations by 2016.”

Leung said Hong Kong could act as an important intermediary to facilitate trade and economic activities between ASEAN and the Chinese mainland for mutual benefit.

“Quite a number of Hong Kong companies and manufacturers eye ASEAN countries like Myanmar, Cambodia and Laos, so I see the negotiations and the finalisation of the FTA would benefit all countries in ASEAN,” he said.

According to Leung, total trade between Malaysia and China, including the Hong Kong SAR, rose 16 percent last year, and 12 percent of the trade, now over $100 billion, was settled via Hong Kong.

Moving forward, he said cooperation between Malaysia and the Hong Kong SAR could be further strengthened in tourism and logistics industries.

Leung was scheduled to deliver a keynote speech and attend a dinner reception in Kuala Lumpur, while also meet officials from the ASEAN members, Malaysian business leaders, and Hong Kong people in Malaysia.



Source : China Daily | April 27, 2015

Thomas D’Innocenzi

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Europe gaining importance in China’s foreign investment


Chinese investments are expected to increasingly target Europe, driven by business synergies, high-tech content and the need for diversification in terms of currency and geography, Dagong Europe said in its latest report.

The European branch of Chinese rating agency Dagong Global said investments in Europe are driven partly by China’s aspiration to transform its local dominant players into global leaders and partly by its need to upgrade its domestic production base.

“Investments in Portugal, Italy, Greece, Spain, Poland and Hungary were primarily made to provide financial support to local infrastructure projects and facilitate trade, whereas deals in Britain, France, Germany, Sweden and Norway were mainly driven by China’s desire for technology,” the report said.

Dagong Europe estimated that in the short to medium term, a strong focus on sectors with high technological content, thorough know-how and strong brand recognition, will continue to drive Chinese investors’ interest in the automotive, engineering, machinery and utility sectors.

In the longer term, the Milan-based rating agency sees the focus moving to renewables, environmental technology and lifestyle sectors, as the environment and living standards gain importance in China.

“We expect to see an increasing focus on European infrastructure, energy, pharmaceuticals, automotives, telecommunication and manufacturing,” the report added.

China’s investments in Europe hit a record high in 2014, Richard Miratsky, head of the Corporate Analytical Team at Dagong Europe, highlighted.

“Utilities and high-tech sectors are definitely holding the attention of Chinese investors, but we see food and agriculture, commercial real estate and leisure and luxury gaining momentum in the medium term,” he said.

The increasing investments in European sectors and countries where assets no longer appear underpriced due to the prolonged adverse macroeconomic development over the past half-decade suggested that this is “a structural trend, not just a cyclical phenomenon,” the report added.

Sizable Chinese investments in Italian utilities and the recent agreement on the Chinese entrance to tyremaker Pirelli ranked Italy as the second most attractive country in the European Union after Britain, according to Dagong Europe.



Source : China Daily | April 23, 2015

Thomas D’Innocenzi

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China makes first Silk Road fund investment


The ‘Belt and Road Initiative’ gets a major boost with Pakistan project, say experts 

The Silk Road Fund’s first overseas investment project is expected to demonstrate a new financing model that supports infrastructure construction and improves connectivity across the regions involved in the “Belt and Road Initiative”, experts said on Tuesday.

The $40-billion Silk Road Fund, set up in December 2014, will inject capital in China Three Gorges South Asia Investment Ltd, a subsidiary of China Three Gorges Corp, to develop the Karot hydropower project on the Jhelum River in northeastern Pakistan.

The project will be funded through a mix of equity and loan investments, said a statement released on the website of the People’s Bank of China, the central bank.

“The investment structure includes global investors and follows international standards, which means the project is feasible and can achieve mutual benefit and win-win results for partners,” Jin Qi, chairwoman of the Silk Road Fund Co Ltd, told China Daily in an exclusive interview.

The infrastructure construction project, under the framework of the China-proposed Silk Road Economic Belt and the 21st Century Maritime Silk Road initiative, is expected to ease electricity shortage in Pakistan and support its economic development, said Jin.

“It also shows the fund’s attitude of being open and inclusive,” she said.

The fund will take a stake in a subsidiary of China Three Gorges Corp-the Three Gorges South Asia Investment Ltd, which is jointly developing the hydropower station with Pakistan’s Private Power and Infrastructure Committee. It will also invest in other clean-energy projects in the South Asian region. The International Finance Corp, a member of the World Bank Group, is another shareholder in the Chinese construction company.

The Silk Road Fund has also joined a consortium comprising the Export-Import Bank of China, China Development Bank and the IFC to provide loans. But the fund has not yet disclosed further information about the ownership ratio or amount of the loan.

John Zhou, an economist at HSBC Holdings Plc, said that the fund’s investment structure is a balance between both opportunities and risks under the “Belt and Road Initiative”.

“In terms of the equity investment, investors’ returns are more correlated with the performance of the projects, giving them every incentive to perform detailed due diligence,” said Zhou. “For the recipient countries, direct equity investment is generally considered the most beneficial.”

As for the loan, it needs to be serviced immediately and continuously, but the returns are more stable, he said. “But it is equity investment where the ‘Belt and Road Initiative’ will look to truly innovate by involving public and private investors, as well as international organizations-old and new.”

“The fund could become a model of public-private cooperation”, as the central bank Governor Zhou Xiaochuan has stressed that it will operate like a private equity fund but with a longer investment horizon, the HSBC economist said.

The launch of the fund’s first project also means that China has started to diversify the investment of its foreign exchange reserves, said Zhang Xiaoji, a researcher at the State Council’s Development Research Center.

Initial capital of the fund was $10 billion, with 65 percent coming from the nation’s foreign exchange reserves.

“By using the foreign exchange reserves for equity and debt investment purposes, the fund will provide more opportunities for Chinese enterprises going overseas,” he said.

The “Belt and Road Initiative” is expected to be a key part of China’s economic and overseas development plans for years to come and financial platforms will be important for supporting construction projects in the countries involved, said Zhang Xiaoqiang, vice-chairman of the China Center for International Educational Exchange, a government think tank.

In addition, one of the major themes of the New Silk Road roadmap is the way it will integrate China’s financial market with the rest of Asia, he said.

“The Silk Road Fund could develop cooperation with international financial institutions, such as the Asian Development Bank and the World Bank, as they have complementary advantages, to give financial support in the regions,” said Zhang.



Source : China Daily | April 22, 2015

Thomas D’Innocenzi

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China unveils measures to boost exhibition industry


China is planning to boost development of the exhibition industry through market liberalization, according to a guideline released by the State Council on Sunday.

A ministerial joint conference, including a dozen central government departments, will be established to coordinate the formulation and implementation of new market rules, the guideline said, setting a deadline of 2020 for China to have an exhibition center “with a sound development environment and a high level of internationalization”.

Licensing of economic and technological exhibitions will be gradually delegated to provincial-level commercial authorities, while the number of government-funded exhibitions will be reduced. In their place, private companies are encouraged to organize and sponsor such events, according to the plan.

It said China will guide big exhibition companies to acquire, merge with or buy stakes in foreign counterparts to establish multinationals.

Small exhibition firms will meanwhile enjoy tax breaks, and customs procedures will be streamlined to facilitate cross-border events.

The government plans to support exhibition-related sectors including transport, logistics, telecommunication, finance, tourism, catering and hotels.

China will “set up a cooperation mechanism” for domestic and foreign exhibition companies, and invite global giants to hold events in China, according to the plan.

It also said authorities will strengthen intellectual property rights protection, with rampant counterfeiting in China a big turn-off for international brands interesting in exhibiting here.

China is a latecomer to the exhibition business compared with developed countries, but it has become the world’s second-largest exhibition holder in terms of the number of events and venues.

Despite the achievements, the guideline noted that China’s exhibition market is far from mature, with weak global competitiveness and an absence of sound policies.



Source : China Daily | April 20, 2015

Thomas D’Innocenzi

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Japan, Thai firms in JV in Indonesia


Jakarta-listed property and construction company Surya Semesta Internusa (SSIA) is looking to strengthen its portfolio in the warehouse business, having established a joint venture with two foreign companies to work on its “technopark” projects in its West Java industrial estate and other potential cities nationwide.

SSIA announced on Wednesday that it has set up a joint venture with Japan-based Mitsui & Co Ltd and Thailand-based Ticon Industrial Connection Plc to establish SLP Surya Ticon Internusa, a new company with a focus on constructing, leasing and operating warehouses and ready-to-use factories.

According to the company’s documentation, the authorised capital of the new entity is around US$185.6 million, while its issued and paid-up capital is around $46.4 million.

SSIA owns a 50 per cent stake in SLP, while its foreign partners hold 25 per cent each.

As its initial project, the joint venture will work on SSIA’s Suryacipta Technopark project, which is located within the company’s Suryacipta City of Industry in Karawang, West Java – having acquired the 22 hectares of land from the 567-ha industrial estate.

SSIA’s general manager of finances and accounting, Sony Satianegara, said that the new entity would disburse about $75 million in investments to develop the technopark, which includes a sum to purchase the plot of land.

With the issued and paid-up capital already in hand, Sony said that the new entity would source additional loans amounting to around $28 million to meet its capital needs, probably from foreign lenders.

SLP is planning to build a 146,000-square-meter industrial compound consisting of warehouses, ready-to-use factories as well as commercial building.

The first phase of the project, comprising 35,000 sqm of land, concluded construction early in 2014 with a current occupancy rate hitting 81 per cent.

SLP is expected to resume the second phase – comprising 26,000 sqm – this year, with the whole project slated to finish in 2017.

“Once of the project concludes, we expect to see recurring income from the warehouse project reach around 150 billion rupiah [$11.6 million],” he said. Johannes Suriadjaja, president director of SSIA, said that the company hoped to forge a long-term partnership through SLP and was eyeing other cities as places to develop warehouse businesses after the Karawang venture.

“There are other cities that also have promising potential, such as Medan [North Sumatra], Surabaya [East Java] and Makassar [South Sulawesi],” he told reporters

Mitsui & Co.’s general manager of second overseas business development department, Eiichi Tanabe, and Ticon managing director Virapan Pulges said they were confident that the demand was there for SLP’s projects, saying that enthusiasm from Japanese investors and Ticon customers to invest in Indonesia’s growing economy is high. 

Source : The Nation | April 15, 2015
Thomas D’Innocenzi
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Only through quality can China conquer the global market


Chinese smartphone maker Xiaomi is celebrating five years of success this week. In its home market, the company has secured a solid niche and is now extending its reach overseas.

Alibaba’s voyage to success took somewhat longer. When Jack Ma went to Hannover for the CeBIT exhibition 14 years ago, few people were interested in his small e-commerce firm. A second attempt eight years ago to market goods and services in Europe also ended in failure.

Last month, Ma made a triumphant return to the world’s largest high-tech trade fair with a cutting-edge facial recognition payment system developed by his company.

Chinese companies are taking their place on the global stage. Huawei provides telecommunication services in remote parts of Siberia and South American rainforests. China South Railway is making trains for South Africa.

For a long time, “Made in China” was synonymous with poor quality, low prices and fakes. Now, products and services underpinned by innovation are changing the global commercial landscape.

Brands like Alibaba, Lenovo and Huawei are increasingly recognized by consumers abroad, according to a survey on China’s global image by China Foreign Languages Publishing Administration (CFLPA).

“Chinese enterprises are more aware of the need to nurture their brands as part of the ‘go global’ drive,” said Wang Haizhong, a brand strategy researcher with Sun Yat-sen University.

The 2014 Fortune Global 500 list featured 100 Chinese companies, in contrast to 128 United States enterprises on the list.

“Chinese enterprises are hardworking, entrepreneurial, market-sensitive and capital-sufficient,” said Wang.

Innovate, innovate, innovate

Late last month during a State Council executive meeting, Premier Li Keqiang called for an innovative approach to support “Made in China”.

Nearly all entrepreneurs interviewed by Xinhua regard “innovation” as their core competence.

The CFLPA survey showed around 64 percent of all overseas respondents making positive comments on Chinese enterprises’ ability to innovate and the ratio was even higher in developing countries.

Huawei’s Hu Houkun attributes his company’s success to persistent technological progress, an open attitude to cooperation and better management.

Huawei spent 40.8 billion yuan ($6.6 billion), 14 percent of its revenue, on research in 2014. Over 45 percent of its 150,000 staff work in R&D. New ideas such as mobile Internet, cloud computing and big data have helped Chinese companies to catch up with (and even overtake) their foreign counterparts.

Huawei filed 3,442 patent applications in 2014, followed by US chip maker Qualcomm. ZTE, another Chinese telecom systems developer, took third place.

“In the personal computer business, it took Kingsoft 26 years to accumulate 300 million users. We collected the same number of mobile users in only three years,” said Ge Ke, Kingsoft CEO.

The tide of new technology will bring a new wave of innovation to China, Ge said, and with it more Chinese brands will rise to global prominence.

Culture, community, social responsibility

Chinese firms abroad now actively work to adapt to local culture and engage communities. They take social responsibility seriously. Neglect of local conditions has been fatal to many businesses.

Wu Wei, vice general manager of energy equipment producer Tebian Electric Apparatus Stock Co (TBEA), said her company, with training centers in Tajikistan and Kyrgyzstan, employs and trains many local workers in every overseas project. About 95 percent of the employees at a TBEA research base in India are locals, and most were trained in China.

To increase its global profile, white goods producer Hisense sponsors the Australian Open tennis tournament, German football club FC Schalke 04 and Formula 1. Yingli Solar, a leading solar panel producer, has twice been a sponsor of the FIFA World Cup.

As internationalization proceeds, many obstacles remain to be cleared, including previous bad investment decisions and discrimination. One of the greatest challenges is the established stereotype of low prices and poor quality, according to Wang.

“To dismiss this stereotype, competent enterprises in key sectors should stand out with high-quality goods and services, and engage in more global events,” said Wang.



Source : China Daily | April 9, 2015

Thomas D’Innocenzi

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Meet Asia’s new manufacturing powerhouse: Vietnam

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If you thought Asia’s manufacturing giants are just China, South Korea and Thailand, say hello to a new one: Vietnam. Its benchmark purchasing managers’ index for manufacturing has expanded — a reading above 50 — every month since Aug. 2013, according to HSBC and Markit Economics.
That feat is unmatched by any other Asian country that HSBC and Markit track. By contrast, China’s manufacturing PMI has contracted in eight months in that same period. Thailand’s manufacturing, as measured by the government, contracted for 22 months through January.
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“Central to the latest improvement in business conditions were further rises in both output and new orders,” HSBC and Markit said in a note accompanying the release of Vietnam’s March data. Vietnamese firms were able to secure more new orders from both domestic and export clients and “falling commodity prices in world markets continued to feed through to lower input costs,” said Andrew Harker, senior economist at Markit.
Vietnam last year became the biggest exporter to the U.S. among the 10 Association of Southeast Asian Nations, or Asean. And with its strategic location, younger population and lower costs than China, it has drawn the likes of Samsung Electronics, Intel and Siemens, besides apparel and shoe makers.
In Vietnam’s favor, wages are still low, with the average monthly wage at $197 in 2013, compared with $391 for Thailand and $613 for China, according to the International Labour Organization. Its population is younger: only about 6 percent is above the age of 65, compared with about 10 percent in China and Thailand and almost 13 percent in South Korea.
Of course, much of Vietnam’s work now is in low-end manufacturing in textiles, garments, furniture and electronics. That may change, as companies invest in training and R&D. What has raised some questions is worker unrest. Thousands of workers at a Ho Chi Minh City factory struck work this week over a government pension change, the worst labor unrest since last May’s anti-China riots that led to factory closures. It may be the one wrinkle in Vietnam’s rise to manufacturing greatness.
Source : Thanh Nien Daily | April 2, 2015
Thomas D’Innocenzi
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