Exclusive outtakes from industry leaders
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.
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.
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.”
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.
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.
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.
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 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.
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.
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.