China’s economy is becoming stronger and many foreign companies are concerned that China will no longer pay attention to or support  foreign investment. However, according to the  British financial newspaper,  ”Financial Times” states “Thriving China is ever more open for business” . The article was written by Deming Chen, officer of China Ministry Commerce.

Chen Pointed out that : “Sales of consumer goods rose in 2009 to Rmb12,530bn, contributing more than half of gross domestic product. This year China’s domestic market will grow by Rmb2,000bn ($295bn, 193bn, 229bn), outstripping exports. The US is set to gain in particular. The independent American Chamber of Commerce in China recently published a report arguing that in the next 30 years the US can achieve “three trillion-dollar goals”: $1,000bn for annual US exports to China, $1,000bn for revenues of US businesses in China producing goods and services for the Chinese market, and $1,000bn for cumulative Chinese FDI in the US. “

In a sign of shifting global fortunes, China edges out Japan, the one-time biggest US debt holder, currently with $787billion, or 19.8%. This is an increase from $298billion in 2005. In addition, Hong Kong holds $146billion up from $44billion in 2005, putting China/Hong Kong US debt holdings over $1trillion foreign treasury holdings.

As some of the world’s prominent fund managers have turned increasingly bearish about investment prospects in China, Guy Hands at Terra Firma, during his latest trip to Beijing, calls for the world’s young people to “Go East.

But the optimism from the chairman and founder of Terra Firma Capital Partners Ltd., one of the largest private equity funds in Europe, may have arrived late. Many believe the golden period for investment in China is over.

Indeed, Hands’ statement that Terra Firma has started looking for Chinese partners for some businesses may strike some as a tad anachronistic.

“We feel very strongly that the economic future of the world for the next 20 to 50 years is going to be dominated by China,” he told a press briefing in Beijing, adding that the confidence the West had a year ago about a quick recovery “is not there today”.

Kynikos Associates founder Jim Chanos and British hedge fund manager Hugh Hendry are two well-known hedge fund managers who have decided to short China. Both believe that China’s credit excesses have led to bubbles that will burst.

Even Hands acknowledged that the subject of his latest visit to China has been related to “more where I came from, than where I arrived”. Indeed, his view about Europe, and China, may not have shifted so much, had his fund not put a severe dent in its track record by buying EMI Group Ltd..

Terra Firma in 2007 bought EMI for 2.4 billion pounds — around $4.8 billion at the time — in a deal largely financed by loans from Citigroup Inc. The deal soured quickly after its completion as the financial crisis amplified the already significant declines in the recorded music market.

Terra Firma closed that deal in late July or early August of 2007, around the same time that a couple of Bear Stearns hedge funds ran into trouble in the mortgage markets.

“We were wrong by two weeks,” he said in September last year. If Terra Firma had not invested, it would still have 90% of its fund and “would look like geniuses”, Hands said at the time.

“The world has become more difficult to invest in over the last 10 years”, he said. To be successful over the next 20 to 30 years, one would need to think more globally, he said.

Hands didn’t elaborate on what has attracted him most about China. But he indicated that U.K. Foreign Secretary William Hague, who was his best man, shares his optimism, pointing out that Hague visited Beijing as one of his first stops after he took the position.

China Real Time

China’s decision to end the yuan’s de facto peg against the dollar could have a significant impact over time on the fortunes of corporations big and small, Chinese and foreign—even though any movement of the Chinese currency in the near term is likely to be too gradual to matter immediately for  the bottom line. Below is a look at how it might affect the property industry:

China’s property sector, which was on a tear until the government began tightening the sector in April, will benefit from the rising buying power of Chinese consumers, analysts say.

Commercial property–which sees more foreign investment than housing—could experience a boost in interest from foreign funds, says one property analyst from a Chinese brokerage. Real-estate investment funds with long-term horizons, for example, could be attracted to China if they expect long-term yuan appreciation.

One particular beneficiary will be landlords who lease space to retailers, such as Hong Kong-listed Hang Lung Properties and Renhe Commercial Holdings.

One significant effect of a rising yuan on the property business would be on how some developers raise capital. Some developers this year issued bonds abroad ahead of a possible appreciation—which would make dollar debt cheaper in yuan terms—even though they have to pay relatively high coupons. Hong Kong-listed Country Garden issued a $550 million global bond this year with a yield of 11.375%.

Such offerings have dried up more recently, because China property bonds have lost some of their appeal amid concerns that the government’s property-tightening measures will hurt their finances, and also because there was a glut in of supply in the bond market.

Johnson Hu, an analyst from UOB KayHian, says the main reason for overseas fundraising was tighter monetary conditions at home, but anticipation of yuan appreciation may have helped make developers like Country Garden more willing to offer fatter yields.

But the effect on most developers in China would be limited, analysts say. Residential developers wouldn’t see much impact on house sales from a mild appreciation of the yuan, analysts say, especially given recent property-tightening measures and restrictions on house purchases by foreigners.

And most developers are locally funded. CapitaLand, for instance, a Singapore-listed property developer that recently doubled its China portfolio through a $2.2 billion acquisition of Orient Overseas Developments, borrows in yuan for its China business. “This forms a natural hedge,” said a CapitaLand spokesperson.

Typically, property developers here source materials for construction and third-party vendors from domestic companies, so the revaluation of the yuan is expected to have minimal impact.

Johnson Choo, a spokesperson from CentraLand, a property developer based in Zhengzhou, said his company sometimes engages foreign consultants like architects, who must be paid in foreign currency, which would mean savings if the yuan rises. But these payments typically make up a very small part of CentraLand’s expenses, so “it would not have a significant impact,” he says.

China Real Time

China on Tuesday released an official white paper on the country’s Internet industry. It reviews the history of China’s Internet, from its first connection in 1994, a single 64-kilobit line in Beijing’s Zhongguancun district, to the present day, when China boasts more Internet users than any other country. (See full text of the white paper in English here and in Chinese here)

At the end of 2009, the number of Chinese Internet users reached 384 million, or 28.9% of the population, a higher penetration rate than the world average, the paper notes. The paper states that China aims to raise the Internet penetration rate to 45% of the population within five years.

Google on Monday announced a new approach to its operations in China. But the company’s late-night blog post leaves some questions about its new approach unanswered, and whether they fly with the Chinese government remains to be seen.

The key change is in how Chinese visitors to Google.cn, Google’s China web address, are taken to Google.com.hk, its Hong Kong site. Unlike Google’s old Google.cn search site, which it censored in compliance with Chinese regulations, the U.S. company doesn’t filter the Hong Kong site — although it is subject to filtering by China’s Great Firewall for users inside China. Since March, Google.cn has automatically redirected to Google.com.hk, but now users in China land on a clickable image of a search box that links to the Hong Kong site.

In Google’s post, David Drummond, the company’s chief legal officer, says that the Chinese government found the redirect “unacceptable.” But will Beijing see the new method — what Google calls a “landing page” that points to the same destination as the redirect — as much of a change?

Drummond also writes that the changes were prompted by concerns that China wouldn’t renew Google’s Internet Content Provider license. “Without an ICP license, we can’t operate a commercial website like Google.cn — so Google would effectively go dark in China,” he says.

But Internet users in China still have access to Google.com even if Google.cn went away, unless Beijing were to start blocking access for users in China to Google’s global sites (like Google.com), an escalation analysts have said is unlikely. Search results that point to censored sites are still unavailable, and Google.com has been blocked by China in the past, but the idea that Chinese Internet users could search on Google.cn and no other Google sites is a long running misconception.

In China, government officials haven’t yet had much to say. A Foreign Ministry spokesman said Tuesday that the Chinese government “encourages foreign enterprises to operate in China according to the law,” and the Ministry of Industry and Information Technology said it wouldn’t be able to respond immediately.

China Real Time

Real estate investment has becoming more strict now. According to Sina News, many investors in China are keen to look for movie investment projects in China.

According to the report, there are currently 189 film project in 2010 reported and there were less than 100  in 2003. The reason is because, till June 20, 2010, the China movie market has already generated 4.4 billion RMB which increased 80% compared to last year. The market in China this year is expected to exceed more than 10 billion RMB. Even some people engaged in real estate speculation truned to  investing in the film market to capitalize on this burgeoning segment.

General Manager, Gaojun fom Beijing New Film Association said :” the investment for movie now is very fast, if fast, usually, 7-9 month can cover the investment, if slow, need 9-11 months, meanwhile, the return of investment is very high, one movie that they invested in has 200% investment return rate.

According to the National Bureau of Statistics, from January till June 2010, industrial enterprises in China’s 24 regions reported a profit of 1.61 trillian Yuan. Among the 39 major industrial sectors, communication equipment, computer and other eletronic equipment manufaturer growed 1.4 times.

As a part of an economic stimulus plan, China will spend 800 billion yuan for high-speed rail network by 2012. A number from China rail department shows that each kilometer of high speed rail, the investment reached 130 million RMB. This shows that China is willing to build up a good infrustruture so that it can create a better investment enviroment.

While importing international technology for high-spead rail, China is also catch up with its own technology development. There is a saying, from New York to Chicago is simiar as the distance from Beijing to Shanghai, however, in USA the rail will take 18-19 hours, in China, the high-speed rail only take 4 hours.

http://www.china.org.cn/china/2010-07/29/content_20596914.htm

SHANGHAI – Mainland stocks rose for a sixth consecutive day, posting their longest stretch of gains since February, on speculation slowing economic growth will prompt the government to relax property curbs and allow for more bank lending.

The benchmark Shanghai Composite Index gained 0.65 percent, or 16.66 points, to end at 2,588.68 points and e Shenzhen Stock Index climbed 0.6 percent, or 63.18 points, to 10,591.13 points.

“Easing monetary policies is a big possibility,” said Zheng Tuo, president of Shanghai Good Hope Equity Investment Management Co. “That’s probably what the government would start to do to counter the economic slowdown.” The central bank has raised banks’ reserve requirements three times this year and the government boosted down payments and mortgage rates for multiple-purchases of homes to curb record lending growth and asset bubbles.

Citigroup on Thursday lowered its full-year global growth forecasts for 2010 and 2011, according to a strategy report. It also cut its outlook for both years’ growth in the United States, China and emerging markets, the report showed.

China’s GDP growth forecast was cut by 1 percentage point to 9.5 percent, Citigroup’s biggest one-month cut in the country’s outlook since late 2001, the report said. The bank said China would grow at an 8.8 percent rate next year, 0.5 percentage points lower than previously forecast.

China Daily