Summit Notebook

China’s evolving role from producer to consumer

Hardly a day goes by now without some Chinese firm striking a deal to buy assets overseas, but the country’s best prospects for growth may be right in its own backyard. Vivi Lin in Beijing reports on how the world’s workshop is fast becoming one of the world’s top consumers.

Welcome to the 2009 Reuters China Investment Summit

China Investment Summit, August 31-September 2, 2009

China holds the undisputed position as workshop to the world, but it’s also fast becoming one of the world’s top consumers in its own right. As the global financial crisis approaches its second anniversary, China’s role in pulling the world out of recession is gaining growing attention as cash-rich Chinese consumers spend billions of dollars under their government’s $585 billion economic stimulus plan.

The huge spending spree has helped the Shanghai and Hong Kong stock markets rise more than 70% and 40% this year, respectively, as investors from both home and abroad look to get a piece of an economy set to overtake the United States to become the world’s largest by 2030. Even as the rest of the world suffers in recession, China’s GDP is expected to grow 9.4% this year and 11.9% in 2010, according to Goldman Sachs, which recently upgraded its forecasts for the country. Underscoring the growing clout of its domestic market, China’s retail sales surged 15% in the year to July and urban investment rose 33%, even as July exports tumbled 23% year-on-year.

No LUV for China real estate, SOHO says

China’s real estate sector has a chilly winter ahead, said Pan Shiyi, chairman of Beijing property developer SOHO China Ltd. And he had interesting, alphabetical way of describing it.

“I look at the shape of the real estate market and I imagine it bottoming out as a letter “L”. If after the snows earlier this year, China had loosed up its monetary policy, we would have seen a “V”-shaped market. If they had loosened up before the Olympics, we would have seen a “U”. But for them to release new policies now, like reducing the interest rate, it’s already an “L”. I don’t know when the market will come back up.”

More pressure will come to bear on Beijing’s property market, especially the market for lower-end, residential units, as projects built on land released for development in 2007 are completed, Pan said, speaking at the Reuters China Summit in Beijing on Thursday.

“Most developers are building common, residential units. As these units come onto the market, they will deal it a huge hammer blow,” Pan said, adding that China’s policy since late-2006 of promoting the construction of residential units of less than 90 square meters would soon be felt.

“This year in the fourth quarter, the effect of this policy will hit the market and reshape it…. The price pressure will be biggest first on real estate outside the fifth ring road, second on units 90 square meters and below, and lastly on those priced at 8,000 a square meter or more.”

By Lucy Hornby

StanChart keen to tap surging personal wealth in China

Personal wealth is soaring in China, and Standard Chartered is hoping to bring out credit cards and boost its private banking operations to tap that growth, Christine Ip, head of consumer banking, said at the Reuters China Century Summit.

Less than 1 percent of China’s population has credit cards, and more than half of those accounts are inactive, according to McKinsey & Co. Credit card profits in China could hit $1.6 billion by 2013, McKinsey said.

Audio – Supporting China’s rich and needy

The late Chinese leader Deng Xiaoping once proclaimed that “To get rich is glorious”. So many Chinese have taken his words to heart that there‘s now a growing need for expert help in managing the cash mountain. More and more people are sitting on assets worth more than $1 million but need advice on how to venture beyond the savings account at their local bank. Johnson Chng, a partner at Bain & Company, has sliced and diced the Chinese wealth management sector and has some advice for foreign banks on how to approach China’s thriving super-rich. Click here to listen to him.

Fortis China fund expects first QDII fund to hit $500 mln

So far, a handful of Chinese fund management companies have received preliminary clearance to sell products holding overseas stocks to mainland Chinese investors.

Fortis Haitong Investment Management — a Chinese fund management joint venture co-owned by Belgian-Dutch financial services group Fortis — is among the first batch and expects its maiden Qualified Domestic Institutional Investor (QDII) fund to hold assets of at least US$500 million, Tian Rencan, the JV’s chief executive, said at the China Century Summit.

Pudong Bank boosting retail banking as Chinese personal wealth rises

Personal wealth is growing on the back of China’s breakneck economic growth, and Shanghai Pudong Development Bank is gearing up by doubling its outlets to meet rising demand for wealth management services, the bank’s president told the China Century Summit.

Pudong Bank, a local partner of Citigroup Inc, hopes the proportion of its assets from the retail banking business will rise to 35 percent by 2010 from 15 percent now, Fu Jianhua, vice chairman and president of the Chinese bank, said.

JPMorgan’s China asset management venture eyes $1 bln – $2 bln for first overseas fund

JPMorgan’s China asset management venture is considering raising $1 billion-$2 billion for its first overseas investment fund — a product key for the firm to diversify its business risks, the venture’s Chief Executive Mandy Wang said at the China Century Summit.

China International Fund Management Co — which manages more than 70 billion yuan from more than three million customers — won official approval early last month to launch the fund under China’s Qualified Domestic Institutional Investor (QDII) scheme, a programme aimed at easing the upward pressure on the country’s currency.

Audio – China stock markets party on

 The Chinese party, with a small p, is just getting going. That is the stock market view from Yang Liu, the high-profile fund manager and chairwoman of Atlantis Investment Management, which manages $4 billion of Chinese assets. Buoyed by steep earnings growth and an appreciating yuan currency, the China Enterprises index of H shares, or Hong Kong-listed shares in mainland companies, should “challenge the 20,000″ point level next year — that’s a 37 percent jump. And the Shanghai Composite Index, which has doubled in value this year, will rise at least another 10 percent over the next four months, she believes. For her view on the market, including the sectors to buy, click here.

Ernst & Young to add China staff, office

 Chinese clients are eager to expand outside the world’s fastest-growing major economy and Ernst & Young is planning a near four-fold jump in its China staff over the next decade to meet that demand, said Chief Executive James Turley.

The firm, one of the world’s “Big Four” auditing firms, also plans to open two to three new branches annually over the next few years, focusing expansion in western China to support Beijing’s “Go West” economic policy, Turley told the Reuters China Century Summit on a visit to Shanghai, China’s financial hub.

Competition for accounting talent among the four major accounting firms in China is fierce, with many CEOs of foreign companies complaining that it is difficult to find enough qualified financial experts as they expand their business in China.