Thursday, March 05, 2015

Brazil cannot survive on China´s ore demand - Arthur Kroeber

Arthur Kroeber
+Arthur Kroeber 
Brazil depends to a large degree on China´s demand for its ore. But that dependence is dangerous, economist Arthur Kroeber told a conference in the country. Demand will be high for the next five years, but then drop sharply, and cause trouble if Brazil has not diversified its economy.

From Latino Foxnews
Arthur Kroeber, a U.S. economist, said in a speech here Tuesday that China's real-estate sector has already reached its peak and therefore Brazil "must find other growth mechanisms." 
Kroeber added that Brazil must be aware that the recent sharp rise in raw-material exports to China will come to an end and cannot pin its growth prospects on a boom period. Driven over the past two decades by rural dwellers' large-scale migration to the cities and urban residents' desire to upgrade to more modern homes, China's housing market may remain strong for some time but is eventually headed for a fall, the expert said. 
He predicted that Chinese President Xi Jinping's government will take steps to slow the pace of the downturn and maintain China's construction industry afloat over the next five years, saying those policy actions also will keep demand for Brazilian steel stable. China is the biggest market for iron-ore exports by mining giant Vale, Brazil's second-largest company and the world's biggest producer of that base metal, the main ingredient in steel-making. 
"You have to be realistic. The demand for raw materials will never be the same," Kroeber said, adding that "Brazil must seek out new opportunities and see where it can gain an advantage because the game is going to change completely."
More at Latino Foxnews.

Arthur Kroeber is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers´ request form.

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Apple´s capitulation to China gives Obama a problem - Ben Cavender

Ben Cavender
+Benjamin Cavender 
China´s proposal to IT vendors to give access to their devices to fight terror has raised the tensions in the industry. Apple seems to have agreed to share its source code with China, and that might cause Obama a headache, says business analyst Ben Cavender in Quartz.

Quartz:
Apple’s capitulation to China’s demands weakens Obama’s position, and makes life even more difficult for other US tech companies, analysts say. The US tech industry has been lobbying against the Chinese cyber-security regulations, and US secretary of state John Kerry and other US officials sent a letter of complaint to their Chinese counterparts last month. 
“Apple does place the Obama administration in an awkward position, as it is one of the largest tech companies in the world and it seems to be willing to open its doors in return for market access,” Ben Cavender, a Shanghai-based analyst at China Market Research Group, told Quartz. “This could definitely make it harder for the administration to effectively argue that companies will not be willing to concede to demands from the Chinese government.” 
None of Apple’s competitors, or the tech industry trade groups lobbying the Chinese government, would comment on the topic on the record. But some executives said privately that Apple has a long tradition of acting independently from the industry when it comes to dealing with foreign governments.
More in Quartz.

Ben Cavender is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers´ request form.

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Financial leasing firms getting into trouble - Sara Hsu

Sara Hsu
+Sara Hsu 
Financial leasing companies, unless they are supported by one of the banks, are increasingly running into problems, as they lose access to funding, writes financial expert Sara Hsu in The Diplomat. " Ordinary financial leasing companies in particular are feeling the funding pinch."

Sara Hsu:
By contrast, many financial leasing companies that are not associated with banks have found it difficult to obtain funding in an environment of low growth and tight liquidity. Sources of revenue stemming from three areas, including interest margin revenue, or interest earnings on leases, residual value revenue, or price earnings on the leased item, and service revenue have shrunk in recent months. Ordinary financial leasing companies regulated by the Ministry of Commerce may fare worse than special financial leasing companies, which face more exacting regulation. For the latter, the CBRC laid out the new Administrative Measures for Financial Leasing Companies on March 13, 2014, lowering the barriers to entry into the financial leasing industry, while requiring at least one eligible commercial bank, domestic large manufacturer, or overseas financial leasing company to hold a minimum 30 percent stake in the company. Ordinary financial leasing companies in particular are feeling the funding pinch. 
Potential financial leasing firm failures would recollect the wave of leasing firm collapses that occurred between 1997 and 2000, as turnover fell sharply. The situation subsequently improved, and as regulations were revised in 2007, the leasing industry was rejuvenated. As the economy boomed, financial leasing loans enjoyed in excess of 54 percent compound annual growth between 2009 and 2013 under loose leverage restrictions. The economic slump that hit once again in 2014 increased risk and funding costs in the industry, particularly for leasing firms lending to trade-sensitive industries such as shipping and packaging. 
Both bank-affiliated and non-bank affiliated financial leasing firms have bolstered their methods of controlling risk, improving both asset allocation and asset management. In an environment of rising non-performing bank loans, some financial leasing companies have also revisited their asset disposal procedures. This is important, as the new regulations for financial leasing companies laid out by the China Banking Regulatory Commission in March 2014 require bank-affiliated financial leasing firms to shore up liquidity where necessary because of solvency problems or operating losses. This increases the obligations on bank-affiliated financial leasing companies. It’s a good thing these firms are safe in the arms of banks, as non-bank affiliated leasing firms continue to suffer.
More in the Diplomat.

Sara Hsu is a speaker at the China Speakers Bureau. Do you need her at your meeting or conference? Do get in touch or fill in our speakers´ request form.

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US, UK top destinations for study – Rupert Hoogewerf

Rupert Hoogewerf
Rupert Hoogewerf
Both the US and the UK retain their top positions as a destination for study, reveals the Hurun Chinese Luxury Consumer Survey. They are followed by Australia and Canada. Surprising newcomer is New Zealand at not five, Hurun founder Rupert Hoogewerf tells in the PieNews.

The PieNews:
The top five destinations for undergraduate and postgraduate study were the US, the UK, Australia, Canada and New Zealand, the survey by luxury publishing and events group Hurun Report shows. 
This is the first year New Zealand has entered the top five, overtaking Switzerland. “New Zealand breaking into the ‘Big 5’ shows how far it has come to building a global education programme, attracting many of China’s most successful families to send their children to study there,” commented Rupert Hoogewerf, the Hurun Report’s founder, chairman and chief researcher. 
“New Zealand’s all-round education system is able to compete at the very highest levels in the world.” 
Survey respondents also nominated their favourite study abroad education agencies, with BE Education voted the best high-end overseas study brand. 
Shinyway was voted China’s best education agency for consumers heading to the US, while Haiyi was dubbed the best education agency for Switzerland. 
Hoogewerf noted that 80% of wealthy families in China now intend to send their children overseas. The average age for millionaires to send their children abroad for study is 16, while the average for billionaires is 18. 
Now in its 11th year, the report is based on a survey of 376 Mainland Chinese ‘millionaires’, each worth RMB10m (US$1.6m) and with an average wealth of $6.8 million.
More in the PieNews.

Rupert Hoogewerf is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers´ request form.

Finding a study destination is often a first step, followed by purchasing real estate and other investments, by wealthy Chinese. Are you interested in more experts on China´s outbound investments at the China Speakers Bureau? Do check our latest list.

Tuesday, March 03, 2015

The wealthy at China´s legislature - Victor Shih

Victor Shih
Victor Shih
China´s lawmakers are preparing for their annual sessions of the advisory CPPCC and the National People´s Congress. Among them a large amount of influential business people. Political analyst Victor Shih explains the interaction between business and politics in China in the New York Times.

The New York Times:
A seat on one of the two bodies is highly desirable, not because the positions are powerful, but because being a delegate provides access to the highest echelons of the party and the government. It is also a clear sign to potential business partners and rivals of political clout.
Membership in either body can also provide wealthy Chinese with protection from government actions that could hurt their businesses — something that wealthy Americans can achieve by hiring lobbyists, lawyers and public relations consultants — said Victor Shih, an associate professor at the University of California, San Diego, who studies the confluence of finance and politics in China.
Because the two Chinese bodies have “many positions where businesspeople can legitimately obtain such protection, the wealthy business elite use their influence to obtain positions in these bodies,” Mr. Shih said.
Among the delegates who will convene at the Great Hall of the People this week are some of the most famous names in corporate China, including Pony Ma, chief executive of Tencent Holdings; and Robin Li, chief executive of the Google rival Baidu Inc. The Hurun list also includes some Hong Kong tycoons who are members, among them Victor Li, the son of Li Ka-shing, the chairman of Cheung Kong Holdings. Hong Kong, part of China since 1997, sends delegates to Beijing every March for the meeting.
More in the New York Times.

Victor Shih is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers´ request form.

We summarized our take on China´s major trends for 2015. Click here for an overview.

Monday, March 02, 2015

Women execs in China, UK and US beat inequality - Rupert Hoogewerf

Rupert Hoogewerf
Rupert Hoogewerf
The number of leading women executives rises, says Rupert Hoogewerf, founder of the China Rich list, especially in China, the UK and the US, where inequality between men and women has been dropping, he tells in the Shanghai Daily.

The Shanghai Daily:
A number of businesswomen on the list excel in areas where men have held sway. 
When it comes to property development, there is Zhang Xin, co-founder and CEO of Soho China, and Sonia Cheng, CEO fo Hong Kong's Rosewood Hotel Group and executive director of New World Development. In venture capital, there is Xu Xin, founder of Capital Today. 
Women also maintain their edge in the food industry. Foshan Haitian Flavouring & Food, China's equivalent of Heinz, is headed by Cheng Xue, a newcomer on the list. 
"China, the US and the UK are leading the world when it comes to gender equality in business," said Rupert Hoogewerf, chairman and chief researcher of the Hurun Report, which specializes in wealth rankings. 
A Hurun Research Institute study last year found that 19 Chinese women were members of the world's 45-strong self-made female dollar billionaire club, with three of them holding the top three spots.
More in the Shanghai Daily.

Rupert Hoogewerf is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers´ request form.

Are you interested in more experts on cultural change at the China Speakers Bureau. Do check out our recent list.  

Friday, February 27, 2015

SEC kills ´nuclear option´ for US-listed Chinese firms - Paul Gillis

Paul Gillis
+Paul Gillis 
Chinese and US stock regulators have been at loggerheads on the rules US-listed Chinese companies have to follow. In that struggle, the SEC has caved in, according to a WSJ story, and accounting professor Paul Gillis complaints on his weblog that the effort to let those Chinese firms comply with US law has gone awry.

Paul Gillis:
I believe that the SEC went after the Big Four firms intending to use the lawsuit as a way to coerce China to the negotiating table. The Big Four are not the problem with the widespread fraud that has plagued US listed Chinese companies. The problem, of course, is corrupt company officials. The firms should have done a better job vetting new clients, and have faced challenges with adapting audit processes to Chinese business practices. The explosive growth of these firms has left them short of experience – especially with inadequate numbers of “no-hair, gray haired” partners with well-seasoned judgment. In my opinion, the Big Four are doing their best in a difficult market, and because of the failure of the SEC and PCAOB to effectively regulate US listed Chinese companies, the Big Four are the only meaningful line of defense for investors. 
In my view, banning the Big Four was never the objective of the SEC. The suit was a way to show Chinese regulators that the SEC was willing to deploy the “nuclear option” of kicking Chinese companies off U.S. exchanges. The SEC apparently believed that the threat of delisting Chinese companies would bring Chinese regulators to the negotiating table. The SEC miscalculated and Chinese regulators called their bluff. In the end, banning the firms, which would lead to a mass delisting of Chinese companies from US exchanges, was simply a step too far for the SEC to take. I am sure the SEC was heavily lobbied by US investment banks, lawyers, and accounting firms that have lucrative business interests in keeping capital flowing. 
So today we have different rules for Chinese companies that list in the US than we have for others. Not only is the SEC dependent on Chinese regulators to decide what documents they can see, the PCAOB remains unable to conduct inspections of auditors. But the different rules go beyond auditing. Other rules, like Regulation Financial Disclosure, do not apply to US listed Chinese firms, creating an unfair market for investors. The Wall Street Journal thinks the SEC should do more to flag the risks of investing in Chinese companies. I think it has done a fine job in that area, but few investors read or heed the disclosures. What we need are regulators willing to “just say no” to listing companies that are not willing or able to fully comply with US laws.
More at the ChinaAccountingBlog.

Paul Gillis is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers´ request form.

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Thursday, February 26, 2015

How Geely bought Volvo - Joel Backaler

Joel Backaler
+Joel Backaler 
In his book China Goes West: Everything You Need to Know About Chinese Companies Going Global author Joel Backaler describes how Geely bought Volvo. An example of how China´s business leaders do things differently. From an excerpt at his weblog.

Joel Backaler:
Ever the ambitious visionary, Li (Shufu, Chairman of Chinese automaker Geely) had his sights set on Volvo early. Through Li’s research, he had learned Volvo was never a strategic brand for its American owner, Ford Motors. This is because Ford has been and remains primarily a mass-market car company; as a premium brand, Volvo was out-of-reach for many of Ford’s target consumers. As early as 2002, Li began contacting Ford, to try to convince them to take his intention to buy Volvo seriously. He sent letters to Ford’s senior management and networked with them at auto shows, but without success. Li took his first trip to Ford’s headquarters in Detroit to visit its Chief Financial Officer in 2007, but he did not receive a warm welcome. Instead, Li was met with concerns about his ability to raise sufficient capital for a deal, and was reminded of the fact that Geely was a relative unknown in the West. At the time of his first visit Volvo was not nearly as troubled as it was about to become, but Li had his heart set on acquiring the Volvo brand from Ford at all costs.It wasn’t until the 2008 global financial crisis occurred that Ford’s leadership finally became receptive to Li’s proposition. Li began to rack up miles on overseas flights to Detroit and Gothenburg, Sweden, where Volvo was based. To appease Volvo’s senior management, Li committed early on to ensure Volvo’s headquarters stayed in Sweden and its leadership team remained intact. Geely’s acquisition of Volvo would keep 16,000 local employees at their jobs. Back in China, Li communicated with regulatory authorities to make them aware of the potential acquisition and procedural obstacles before they arose later on to impede the deal’s progress. Li effectively painted the picture of a win-win situation for all parties involved in the acquisition. In fact, many of Li’s fellow Chinese automotive executives believe that one of the greatest talents he brings to the table is public relations. 
Li also wooed the Swedish leadership team of Volvo by emphasizing the vast untapped potential of the Chinese auto market. He argued that while the US, Germany, and France had all been major markets for Volvo in the past, they were highly competitive and increasingly saturated. China was not only the world’s largest auto market; it also had tremendous growth potential given China’s historical absence of car ownership. There were 62 million automobiles on China’s roads in 2009, which some projected would grow to reach 200 million by 2020. By selling China as the world’s largest automobile market, Li helped paint a path of opportunity for future growth, and a chance to make Volvo profitable in China. Li also underscored the potential for selling Volvo’s European premium brand to China’s growing population of luxury consumers. With Li offering the localized know-how to navigate the intricacies of doing business in China, Volvo’s management saw how they could benefit from the acquisition by Geely. 
In August 2010, the farm boy from Hangzhou, China, officially acquired the movie star from Gothenburg, Sweden, for $1.5 billion. By 2013, China became Volvo’s most profitable market, where it produced 42,000 automobiles. Doug Speck, Senior Vice-President of Sales and Marketing for Volvo told the Financial Times in a 2013 interview: “We expect a significant bump-up from localization.” Management expects annual sales to increase to 200,000 by 2015 after the Chinese government officially recognizes Volvo as a local firm through Geely’s ownership in 2014. Li Shufu fulfilled his commitment to open new markets for Volvo, while acquiring a global luxury car brand to help boost Geely’s international image.
 More at the China Business Review.

Joel Backaler is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers´ request form.

Are you interested in more experts on China´s outbound investments at the China Speakers Bureau. Do check our list here.

Tuesday, February 24, 2015

China´s weak military spots - Wendell Minnick

Wendell Minnick
Wendell Minnick
China´s expanding military power got much media coverage over the past years. But defense analyst Wendell Minnick got a just released report on a less covered subject: why is China´s military build-up less strong than anticipated. From Defense News.

Wendell Minnick:
Sponsored by the USCC and produced by the International Security and Defense Policy Center of the Rand National Security Research Division, the report is based on the premise that understanding where the People's Liberation Army (PLA) falls short of its aspirations, or has not fully recognized the need for improvement, is just as important as recognizing the PLA's strengths. 
The report looks at two critical shortcomings: institutional and combat capabilities. On institutional issues, the PLA faces shortcomings regarding outdated command structures, quality of personnel, professionalism and corruption. Combat weaknesses include logistical, insufficient strategic airlift capabilities, limited numbers of special-mission aircraft, and deficiencies in fleet air defense and anti-submarine warfare. 
"Although the PLA's capabilities have improved dramatically, its remaining weaknesses increase the risk of failure to successfully perform some of the missions Chinese Communist Party [CCP] leaders may task it to execute, such as in various Taiwan contingencies, maritime claim missions, sea line of communication protection, and some military operations other than war scenarios."
Much more in Defense News.

Wendell Minnick is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers´ request form.

Are you interested in more recent stories by Wendell Minnick? Check out this regularly updated list.  

Why Paris is the best shopping city for Chinese - Rupert Hoogewerf

Rupert Hoogewerf
Rupert Hoogewerf
Many cities look try to lure massive spending Chinese tourists, but Paris is year after year a winner, also when it comes to what they spend per capita. China Rich List founder Rupert Hoogewerf explains the magic of France´s capital in the Jakarta Post, and the challenges for competitors.

The Jakarta Post:
France outstrips its Mediterranean neighbours when it comes to the "Peking Pound". A Chinese tourist will spend up to 900 euros ($1,029) in Spain, but in Paris the amount jumps to 1,500 euros a visit. The capital is the top tourist destination in the world - with about 32.3 million visitors in 2013 - and the Chinese formed the fifth-largest group of visitors after the UK, the United States, Germany and Italy. 
Paris is also the preferred shopping city in the world among the Chinese, according to Global Blue, a tourism shopping tax refund service provider. Rupert Hoogewerf, founder and compiler of the Hurun China Rich List and other research material regarding China's elite, says France consistently rates highly among the country's super rich. "The appeal of Paris is enormous: wine, luxury, art, food. There's an element of that high, extended lifestyle. In Hurun's Best of the Best List 2015, France comes in second to Australia for top international luxury travel destination, beating the Maldives and Dubai, and Air France ranks higher than British Airways for its first and business class travel. 
"French brands have built up a cachet and it's had a huge impact on China. Chanel is the queen of luxury for women. Hermes and LV (Louis Vuitton) are popular with Chinese men," Hoogewerf says. 
"As the Chinese domestic luxury market has flattened out because of high prices and the anti-corruption drive, there has been this overseas shopping spree. It's putting pressure on the brands, and it's a real headache for them. They need to maintain that standard of service. Someone who buys a watch in Switzerland will expect that level of service in China. It's a challenge."
More in the Jakarta Post.

Rupert Hoogewerf is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers´ request form.

At the China Speakers Bureau we see seven major trends for 2015. Check here for our list.