China’s largest steelmaker Baosteel Group, which has signed a 10-year iron ore contract with Fortescue last year, may buy a stake in Australian iron ore miner Fortescue Metals Group Ltd to ensure stable raw materials supply.

“Baosteel will seek a stake in Fortescue when both sides reach an accord on a number of things, including common goals, development strategy and market positioning,” said Xu Lejiang, chairman of Baosteel Group, yesterday at Baosteel’s Majishan Port in Zhejiang province, where he received the first shipment of 170,000 tons of iron ore from Fortescue.

Having already signed contracts with 33 large and medium-sized Chinese steel manufactures for at least 10 years, the third largest iron ore supplier in Australia said it welcome direct investment by major Chinese companies. Furthermore, with most of its iron ore to be sold in China, Fortescue expects to increase annual production capacity to 100 million tons in 2010.

“The Chinese industrial champion takes Fortescue very seriously, and we will encourage its participation in the future of Fortescue,” Andrew Forrest, founder of Fortescue, was quoted by Reuters as saying yesterday.

Liu Yanqi, an analyst at Haitong Securities, said, “The possible alliance is expected to strengthen Baosteel’s power in iron ore price negotiations with Australian miners, such as Rio Tinto and BHP Billiton.”

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Australia, Baosteel, China, Fortescue, investment, iron ore

The Ministry of Industry and Information Technology said on Thursday that due to technological innovation, China’s software exports surged in the first four months of this year.

In the January-April period, exports totaled $3.27 billion, up 54.9% year-on-year. And the software sector’s revenue was 193.55 billion yuan, registering an increase of 31.2%.

In 2001, China’s software exports were worth $720 million and the figure rose to $10.24 billion in the year 2007. And the sector’s income was 583.4 billion yuan in 2007, up 630% from 2001, according to the Ministry.

Last year, Chinese software accounted for 8.7% of the global industry, up from 1.5% in 2001.

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China, export, innovation, Outsourcing, software

LG Electronics and China’s Haier Group Corp are among the potential buyers of the century-old appliances division of General Electronics.

According to Stephen Tusa, an analyst at JP Morgan Chase& Co, GE’s appliances business had 27% of the US market in 2006. And Credit Suisse Group estimates that the unit had revenue of $7.2 billion in 2007. But amid calls for the company to speed up divestiture of slower-growing operations, GE announced this month its plan to sell the unit.

Buying GE’s unit will help LG Electronics challenge Whirlpool Corp’s lead in appliances around the globe while a purchase by Haier will make it a household name to promote its expansion in the US.

“Both LG and Haier need GE to break into the US market, because it has a very strong brand,” said Castor Pang, an analyst at Sun Hung Kai Securities in Hong Kong. “Buying GE would be a big advertisement for them. After all, the US market is still a very big one.”

“The players have become very obvious. Its Haier in China, LG in South Korea and so on”, said Jeffrey Immelt, CEO of the US company. Other potential bidders mentioned included Mexico’s Controladora Mabe and Turkey’s Arcelik.

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appliances, China, electronics, GE, Haier, LG

China Construction Bank (CCB) announced on May 27th that the Bank of America is to exercise part of its call option to buy 6 billion Hong Kong-listed CBC shares from Huijin at about 2.42 Hong Kong dollars (about 31 U.S. cents) per share.

This will reduce Huijin’s CCB stake to 65.4% while boost Bank of America’s share to 10.75%, or 25.1 billion H-shares, according to the announcement.

Without CCB’s written agreement, the shares purchased under the option may not be sold until Aug. 29, 2011.

The Bank of America planned to finish the transaction on June 5, under an agreement it signed in 2005 with Central Huijin Investment, an investment arm of the government.

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Bank of America, CCB, China, investment, stake

China has begun to figure as an alternative for the practice of shipping tech tasks offshore after India’s run of stunning good fortune.

One advantage is that China has a large labor supply pool like India and the other one is that if you’re dealing with customers or companies who have an Asian headquarters, there is a language and cultural advantage in China. Particularly in cities like Shanghai, which has bilingual engineers who speak both Japanese and Chinese. China is associated with low cost, at least in the software industry.

The shift has not gone unnoticed by leading technology outsourcers in India, who are dealing with creeping wage inflation. As a result, some are fast establishing a presence in China to remain competitive with their peers.

How big this trend will become remains unclear. Revenue from IT services is rising in China, but it is still barely half of India’s $12.7 billion a year, according to a recent report from consulting firm McKinsey.

There are both advantages and disadvantages in China right now. One is the intellectual-property protection issue. The second is their English language capability, and the third is their lack of project management expertise. According to McKinsey, China faces other challenges, not the least of which is a lack of management talent.

The challenge in China is only in the project management area–project lead area or the specialized consultant area. But at the grassroots level, the attitude as well as the ability to do hard work and the quality of output–all that is very good.

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China, Outsourcing

As Macao’s economy is witnessing a rapid development, many Australians saw “significant opportunities” in the Special Administrative Region (SAR), said Les Luck, Australian Consul-General Hong Kong and Macao, when delivering a speech at an Australian reception in the island city on May 22nd.

The Consul-General said he was impressed by the level of Australians’ engagement in Macao’s economy, working in fields ranging from the hospitality, gaming, construction, infrastructure, transportation and food and beverage sectors.

James Packer, Australia’s richest man, has set up a joint venture, Melco PBL Entertainment, with Lawrence Ho, son of Macao gaming magnate Stanley Ho, and has built the Crown Macao, a six-star casino resort. And a larger integrated casino resort project initiated by Melco PBL is under construction in the city at present.

In addition, statistics released by the Consulate-General show that between 2006 and 2007, Australia’s merchandise trade with the SAR was worth 632.2 million patacas ($79 million), and Australian’s direct exports to the SAR amounted to 565.1 million patacas ($70.6 million) while imports from Macao’s to 67.1 million patacas ($8.4 million).

“We estimate more than 2,000 Australians live in Macao and expect that number will continue to increase,” said Luck.

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Australia, China, Macao, trade

With the high growth rate of China’s economy, the country’s target of doubling its GDP per capita by 2010 relative to 2000 level is under way.

According to a WTO report (drafted independently by the WTO Secretariat) released on May 21, China’s annual growth rate was estimated at 11.4%, higher than the average rate achieved during 2003-2006. Moreover, China has the potential and confidence to maintain this rapid growth in the foreseeable future. So the goal of doubling GDP that was set out in China’s eleventh Five-Year Plan is within reach.

Faced with a number of important social and economic challenges, including various economic imbalances, China also has to increase government expenditure on social services, like health and education, as well as basic pensions, thus possibly reducing the need for precautionary saving and raising consumption.

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China's economy, economic challenges, eleventh Five-Year Plan, GDP, WTO

The first US-bound Chinese leisure tour group is set to depart on June 17, heralding a new era in Sino-US relations. Shao Qiwei, head of the China National Tourism Administration (CNTA), will escort the inaugural tour group to Washington DC, the city to host the fourth China-US Strategic Economic Dialogue on the group’s arrival. Shao told a press conference that CNTA is pleased the bilateral tourism relationship is moving in a new, positive direction.

Last December, the two sides signed a memorandum of understanding (MOU) to open outbound tour-group travel from China to the US. The MOU would open China’s market to the US, and such businesses as tour operators, airlines, hotels and banks are expected to benefit.

And after five months of talks, CNTA and the US Department of Commerce reached agreements on the details.

The first phase will last 6 months, during which only 9 provinces and municipalities can organize US-bound tour groups. Group members must be residents with hukou in Beijing, Tianjin or Shanghai municipalities, or Hebei, Hubei, Hunan, Jiangsu, Zhejiang and Guangdong provinces. And domestic tour operators with licenses in the 9 municipalities and provinces to run out-bound tourism operations can organize US-bound tour groups. As for tourists’ US destinations, there are no specific restrictions.

US Commerce Secretary Carlos Gutierrez believes that the increased visitation from China would be helpful in reducing the US trade deficit with China.

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bilateral tourism, China, CNTA, leisure tour, trade deficit, U.S.

Khazanah Nasional Bhd, the Malaysian government’s $25 billion investment fund, is making evaluations on investments in China’s infrastructure, environmental products, financial and healthcare services, with an aim to tap growth opportunities in the Chinese market.

Expanding beyond owning government-linked companies such as Telekom Malaysia Bhd and Bumiputra-Commerce Holdings Bhd, the Malaysian agency holds $100 billion worth of equity stakes in more than 50 companies in five countries. Its investments include stakes in India’s Apollo Hospital Enterprise Ltd, Hong Kong-traded Parkson Retail Group Ltd, Singapore’s Mobile One Pte and Indonesia’s PT Bank Lippo. It joins the $60 billion Qatar Investment Authority and Singapore’s Temasek Holdings Pte to tap the Chinese market as well as other emerging markets.

“We have a longer horizon compared with the traditional private-equity investors, and we’re experienced in many emerging economies,” said Khazanah’s Managing Director Azman Mokhtar. “We want to offer our experience and our network as the bridge for Chinese companies to invest in third countries.”

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China, investment fund, Malaysia

On May 20, Mexico and China reached an agreement on reciprocal promotion and protection of investments to tighten bilateral economic ties.

The deal, according to Mexico’s Deputy Economy Secretary Carlos Arce Macias, will consolidate a juridical framework more favorable for investments, and will provide juridical guarantee for investments and contribute to the increase and diversification of investments to attract more countries to invest in Mexico.

Meanwhile, it is expected to improve conditions for foreign direct investments, help attract more foreign productive capital and provide better conditions for Mexican investors.

The agreement will be signed in July during President Felipe Calderon’s visit to China.

We, Bpovia Ltd, would like to help you succeed in this promising econimic cooperation.

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bilateral economic ties, China, FDI, investment, Mexico