While rising wages and tightening credit lines have led some manufacturers to move outside southern China, others are choosing stay and move up the value chain to remain competitive. Josh Noble visits two factories that have been operating in Guangdong for over 30 years to find out how they are shifting up market [video].
Tag Archive for 'China'
So, was he right? Ten years ago Jim O’Neill of Goldman Sachs looked at four growth economies – Brazil, China, India and Russia – put their first letters into an acronym, and the Brics (as a concept) were born.
So how have they fared? What if you invested in the Brics ten years ago – where would you be now? Chart of the week finds out. There are a myriad of ways of looking at this, but beyondbrics is going to be hard-headed and stick to equities and GDP.
A quick look at the MSCI indices for the four Brics since 2001 shows that they have comfortably outperformed the S&P 500. If you invested $100 at the time of O’Neill’s report in November 2001 in each of the four Brics, you would now have $674 from Brazil, $451 from China, $459 from India and $414 from Russia. Your 100 S&P bucks? Worth $112 [Read more].
Is Hong Kong losing its allure as a launching pad for foreign brands looking to tap into the Chinese market?
The decision by Gap to set up shops in Shanghai and Beijing in 2010 before making its debut in Hong Kong last week certainly seems to suggest that some foreign businesses have no qualms about bypassing Hong Kong and taking a more direct route into the mainland’s estimated $2,100bn retail market.
There are obvious reasons why brands would jump straight into the mainland. Apart from the sheer size of the market, mainland China’s top cities increasingly offer high-quality shopping centres and department stores where western brands feel at home.
Meanwhile, the cost of doing business in Hong Kong could be prohibitive. Retail rent is now the second-highest in the world and fast-approaching levels charged on Fifth Avenue [Source].
Once an unlikely rival for HP and Apple, Chinese computer maker Lenovo has grown and adapted as quickly as its homeland. Now, with a savvy blend of East and West, it’s poised to be China’s first global brand.
Lenovo is a company the likes of which we’ve never seen. It is a product of Communist China (the government still owns 36% of its parent, Legend Holdings); it is heavily influenced by the democratized West; it boasts an international workforce of 27,000 employees and customers in more than 160 countries.
“This is Lenovo’s moment,” says Lenovo CEO Yang Yuanqing, 47, a former salesman who once delivered computers by bicycle and is now China’s highest-paid chief executive. (His 2011 salary: $12 million.) Yang calls Lenovo’s strategy “protect and attack,” three words you hear repeatedly at the company’s headquarters in Beijing and its offices in Raleigh, North Carolina, where Yang spends a third of his time.
Lenovo seeks to protect its core business–the China and enterprise (large-scale commercial and public-sector) markets, which generated about 70% of its $21 billion in revenue last year. On the attack side, he’s pumping Lenovo’s profits–$273 million in 2010–into emerging markets, new product categories (tablets, smartphones, smart TVs), and, of course, the U.S [Source].
After months of bad news flow – high inflation! interest rate hikes! corruption! high petrol prices! weak currency! – India is finally getting some good news, even if it’s a good two years off.
In 2013, according to an Ernst & Young report released Monday, India will grow at 9.5 per cent, bouncing back from this year’s 7.2 per cent, and outpacing China’s projected 9.2 per cent.
But the report’s projections might be a tad optimistic, given that they are premised on: 1) whether India’s inflation – which hit 10.6 per cent for food articles earlier this month – will fall by the end of this year, and 2) that the US and EU economies do not fall into recession [Source].
If economist Nouriel Roubini was a betting man, he’d be cashing out of China and doubling down on Indonesia.
On his first trip to south-east Asia’s largest economy, Roubini argued the case for countries with growth models like Indonesia, where nearly two-thirds of GDP is domestic consumption, rather than China, at roughly one third and, as he has previously warned , “could be headed toward a hard landing.”
On the other hand, ”China needs to move away from the growth model and find balanced growth of the other emerging markets, like Indonesia, India and Brazil,” he said.
“It is the time of rising power of the emerging markets and emerging Asia is the fastest growing region in the world. Indonesia is a country that can be very important in the global economy. By the end of the decade it will be the 10th largest economy and by 2030, it could be the 6th.” [Source]
Chinese companies are increasing their appetite for corporate acquisitions in Europe.
As Jamil Anderlini writes in today’s FT, the Rhodium Group, an economic consultancy, predicts Chinese groups will invest up to $1,000bn in overseas acquisitions over the next decade, with a big slice of this investment heading to Europe.
In the past decade, China has mostly focused on companies in the US and Australia, as the chart below shows. But wobbly stock markets and declining valuations in Europe have also made assets there attractive.
Europe is China’s most targeted region this year, attracting more than $12bn via 64 deals, and accounting for nearly 30 per cent of all Chinese outbound M&A in terms of deal value, according to Dealogic. This is up from just $2.5bn via 35 deals during the same period a earlier year, accounting for only 6 per cent of total Chinese outbound M&A [Read more].
Asian markets have been gripped by fears of a slowdown in the global economy.
Weak economic data from the US coupled with the ongoing debt crisis in Europe has raised concerns that growth in the world’s two largest economic zones might slow.
Fears have been fanned further after Morgan Stanley downgraded projections for global growth and said the US and Europe were “dangerously close to recession”.
There are concerns that an uncertain economic outlook will hurt consumer demand in developed countries and affect growth in the export-dependent Asian economies.
Some of Asia’s biggest economies, such as China and Japan, rely heavily on demand from the US and Europe to boost economic growth [Source].
Daniel Alegre, Google’s President for Japan and Asia-Pacific, insists that his company is “locally relevant”, as it tries to appeal to the different tastes and internet capabilities of the hugely diverse Asian region.
It signals a shift in the centre of gravity of cyberspace, as Asia becomes the biggest and fastest growing region for the internet.
“Here in Asia… we have very strong competitors. And we thrive on that competition, because it forces us to be better and it forces them to be better and in the end, the internet benefits,” Daniel Alegre says.
The confidence is understandable. Given its global dominance and the new users that the Android operating system is drawing in, Google is still well positioned to challenge the Asian incumbents [Source].
Danny Quah, Professor Quah, an economist at the London School of Economics, has calculated “the average location of economic activity across geographies on Earth” through the last few decades, and found that it has been moving further east. Download the paper here.
[I]n 1980 the global economy’s centre of gravity was mid-Atlantic. By 2008, from the continuing rise of China and the rest of East Asia, that centre of gravity had drifted to a location east of Helsinki and Bucharest. Extrapolating growth in almost 700 locations across Earth, this article projects the world’s economic centre of gravity to locate by 2050 literally between India and China. Observed from Earth’s surface, that economic centre of gravity will shift from its 1980 location 9,300 km or 1.5 times the radius of the planet [Source].
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