Based on the current situation of the housing market, it is estimated that the sales of residential houses is to decline to the level 10 years ago this year. This is attributable to the economic uncertainties as a result of the global slowdown and the tight monetary policy at home, which draw forth homebuyers’ and investor’s wait-and-see attitude.
It is released in the latest report on Shenzhen’s housing market that the average housing prices in May declined 36 percent form the level of last October at 17,350 yuan ($2,540) per sq m to 11,014 yuan per sq m. According to the insider prices are expected to drop another 10 percent as some struggling small and medium-sized real estate developers and speculators are selling properties for cheap to maintain cash flow. And it is reported in some areas housing prices have already dropped 50 percent.
In the first half of this year, the total supply of new residential houses reaches 1.54 million sq m or so, 46 percent of that of the year before. Based on the situation, it is forecasted that another 3.5 million sq m residential housing area will be sold later this year.
It is generally believed that the tightening mortgage policy attributes great to the cool down of the overheating housing market, especially that in the Beijing, Shanghai, Shenzhen, as the housing prices rising has been mainly attribute to speculation.
Popularity: 6%
China Business
decline, global economy, home sales, Shenzhen, uncertainty
Falling prices, discount offers and dwindling transactions, it seems that the real estate market is less attractive to individual buyers in China. On the contrary such a circumstance provides a good opportunity for the foreign investors to enter the market. It is said that some international groups have raised substantial capital for China property funds and are now developing the money, while others are moving capital from less vibrant markets in North America and Europe. Many international funds are also looking for mature properties in key cities, like Beijing and Shanghai.
Besides the local developer’s financing challenges also create opportunities for international investors. Due to the government policies aimed at limiting speculation in the residential property market, tighter monetary policy and the plummeting stock market this year, some less competitive real estate company get merged or acquired by the larger and wealthier developers. By June this year, the value of merger and acquisition deals involving mainland property has reached $15.29 billion which is 142 percent higher than that in the same period last year. And it’s harder for developers to obtain bank loans.
To raise money a lot of property firms offer initial public offerings. But as a result of the stock market plunge and global credit crunch, property security become out of favor. There are some small developers who would like to sell their projects and some listed real estate firms that acquired a lot of land parcel last year but find it hard to develop them now due to the credit crunch.
But the international investors should be cautious in conducting mergers and acquisitions, as the market is experiencing a shift from investment-orientated buying to self-use buying. And somebody thinks that compared with the company’s land reserve bought five years ago, the current price for mergers and acquisitions is not attractive enough.
Popularity: 7%
Investment China
investment, merges and acquisition, real estate market, stock crunch
The new iPhone model makes its debut in the Asia-Pacific region today. In order to get one of the world’s first to grab the new-generation iPhone, fanatical Apple fans around Asia had queued up days before its launch, despite rain or freezing temperatures. By Friday, the line that had been had reached about 1,000 people. Signs went up that said the store had stopped accepting applications.
“This is the year that the cell phone becomes an Internet-connecting machine,” Softbank President Masayoshi Son told the crowd at the countdown ceremony. “Today is that day that will make it real, and it’s a historic day.” The iPhone is designed to browse the Web in much the same way computers do. The networks promoted by Japanese carriers, such as “i-mode” from NTT DoCoMo, are more closed than the Web. Such systems have allowed carriers to control services and charge fees.
A report from Japan said the iPhone’s had potential to change lifestyles and bring new business opportunities. Some people tend to spend an hour or more on daily commutes, and the iPhone could make Netsurfing more than reading or listening to music, it said. It is also said that the iPhone’s arrival could also change the relationship between manufacturers and carriers because of Apple’s clout. Up to now, carriers have had considerable leverage over manufacturers.
The celebration at Japanese carrier Softbank Corp.’s store, which included a digital clock display ticking away over the entrance, was part of a global rollout in 22 nations of the 3G, or third-generation, wireless connecting Apple Inc.’s much-hyped cell phone, an upgrade of the model that went on sale last year in the United States and several other nations.
Popularity: 5%
China Outsourcing
change, debut, iPhone, Netsurfing
The Financial Times reported on July 8th that China’s booming economy in the past two decades has produced a prosperous private wealth and a new class of super-rich. This point is evident in the changes appeared in Hurun Report’s rich list, the minimum requirement rose from $6 million nine years ago to $100 million last year. Besides, the number of dollar billionaires has increased dramatically, from 7 in 2004 to 105 in 2007. And Rupert Hoogewerf, editor of the Hurun Report, said that the country’s parvenu have gone through the initial stage of securing their family’s financial independence and have established relationships with the government and paid their taxes.
On another report, a 2008 world wealth report by Merrill Lynch and Capgemini, 415,000 people who have $1 million in disposable assets are listed, which makes China home to more millionaires than any other country in the world. In a list compiled by Forbes 66 Chinese billionaires are shown. Below the super-rich level is the rapidly expanding class of millionaires.
The growth of private fortune is attributable to three factors, according to The Financial Times: First, “a surge in entrepreneurship in the past two decades has produced a generation of successful private companies”. Lots of these business people and their companies have achieved success and become industry leaders. Second, “the boom in the mainland stock market”. Share prices multiplied in last two years, and a number of entrepreneurs took the golden chance to list their companies and seen their net worth increase dramatically. Third, “the hot property market in many larger cities, which has expanded the net wealth of the country’s rich, many of whom have a significant share of their investments in the real estate sector”.
Another change happens upon the Chinese rich is that more and more them become members of CPC. “At this year’s annual meetings of the National People’s Congress, the legislature, and the China People’s Political Consultative Conference, an advisory body, there were about 80 delegates from the 2007 rich list,” the newspaper reported.
But the average annual incomes in China’s countryside are less than 4,000 yuan, which means a growing wealth gap. Based on this the Chinese government has substantially increased social spending in rural areas, the newspaper reported.
Popularity: 5%
China Business
a new class, china's parvenu, Hurun Report, super-rich
While world leaders gathered in Japan to find solutions to rising energy and food prices, a Chinese official reiterated that China’s support to biofuel development has not caused the global food price surge. Zeng Xiao’an, a deputy department director of the Ministry of Finance said China’s scale of fuel produced form corn is very small and China has already stopped all new projects.
China’s corn-based ethanol production capacity is only 1.3 million tons. But in the US, it’s 19.8 million tons. The US plans to produce 110 million tons of biofuel by 2020. It’s the United States that should take the blame for its massive production of fuels from corn and other grains that has pushed up their global prices. Facing the soaring food prices, especially since last August, the World Bank has said developed countries should reduce the amount of grain being used for fuel and increasing grain aid to regions worst hit by the food crisis.
Having a large population to support, China will not develop biofuel at the cost of grain security, said Zeng, but the central government will offer financial support for biofuel from agricultural waste, such as wheat straw, corn stalks, animal feces and non-grain farm produce, which China produces quite amount every year.
China has always encourage farmers to use green energies like biogas, methane which are both energy saving and environmentally friendly. And China is striving to build a environmentally friendly society.
Popularity: 5%
China Economy
America, biofuel, China, energy shortage, rising food price
CNN reported that Air New Zealand has frozen the salaries of senior executives, cut out bonus payments and is reviewing “nonessential” activities to cut stuff numbers, as it battles soaring fuel costs and sliding passenger demand for seats. Chief executive Rob Fyfe said in a statement Tuesday pay increase for managers will be achieved only through staff reduction or increase productivity. And senior management will be the first to feel the squeeze with their salaries feozen for a year. Other managers will earn less through the loss of short-term incentive bonuses.
Air New Zealand has 20top executive in New Zealand who earn more than 250,000 New Zealand dollar (US$189,000) a year.
Days ago German industrial conglomerate Siemens says it is cutting 16,750 jobs worldwide.
Popularity: 4%
China Outsourcing
Air New Zealand, soaring fuel costs, stuff reduction
Because of the slowing economy, industrial conglomerate Siemens says it is cutting 16,750 jobs worldwide, with 12,600 mostly administrative jobs, along with another 4,150 positions in a restructuring in some of its units. The cuts amount to 4.2 percent of its 400,000 stuffs.
Chief executive Peter Loescher in a statement said that the speed at which business is changing worldwide had increased considerably, and they are orienting Siemens accordingly, and against the backdrop of a slowing economy, they have to become more efficient. Siemens said the cuts were being made in an effort to reduce total costs by $1.8 billion by 2010.
Siemens announced that it will consolidate its businesses from the current 1,800 separate legal entities to fewer than 1,000 and take its 70 regional companies and transform them into 20 regional clusters. It would also reduce costs further by cutting back expenditures for information technology infrastructure and consultants, and the recent streamlining of its management structure and divisions. For example, the management board has been reduced from 11 members to eight and the company’s previous eight divisions have been reduced to just three divisions: energy, industry, and health care. It is said that 5,260 workers among its 136,000 workers in Germany will be cut.
Its chief financial officer Siegfried Russwurm said they want to begin negotiations with the employee representatives quickly in order to make the cuts in a way that would be as socially responsible as possible, and only as a last resort would they terminate employment contracts for operation reasons. Siemens said it was considering offering employees transfers to other companies and early retirement packages in a bid to avoid forced layoffs and dismissals.
Before this announcement, Siemens has faced a corruption and bribery scandal that emerged in 2006. The company has acknowledged dubious payments, totaling up to $2.04 billion, which were used by the company to secure business as Siemens announced.
Siemens is not alone in announcing major job cuts. A big American airline company is planning to cut 7,000 workers starting Aug. 1.
Popularity: 5%
China Outsourcing
a slowing economy, efficient, job cutting, reconstruction, Siemens
According to a research thrown by Alibaba, 65 percent of its members have potential customers in China, while 22 percent of its members have sold their products in China. The need for some consumer goods, such as foods, high-end textiles and garments importing are increasing rapidly.
Some in the industry see a large market for import as Chinese people’s life taste become more and more internationalized. An increasing number of Chinese companies are purchasing hi-tech equipment and materials as they are trying to move the value chain. So there is a potential market in this sector. Meanwhile, many small and medium-sized foreign brands eager to get into the vast market in China, are expecting to enter China through local traders. One example is a small business which is registered on Alibaba. The company’s employees fly to South Korea to get the latest style design and later sell it to the customers in Shanghai.
Based on the trend, many China exporters shift to imports. A typical example is the experience of Liu Xuefei, a trader in Guangzhou, a southern China city. He halted his jobs of selling Chinese ceramics to Australians and Americans and shift to import wine in 2005. Liu changed his business for two reasons. Firstly, the number of rich people around him is increasing; Secondly the United States was urging Chinese yuan appreciation. And he said he majored in economics, and (based on his knowledge), he felt imports in China would be a promising business.
And his 3-year experience has proved his surmise is right. He now sells wine to Chinese who have started to appreciate the drink, which have been considered a part of Western upper-class lifestyle. For thousands of years, baijiu or white spirits has been the dominant drinking. Now China has become the fastest growing market for wine in the world. Liu’s small company sells nearly 60,000 high-end bottles to Chinese companies, including high-end restaurants, airlines and five-star hotels.
Liu is not alone, an increasing number of small and medium-sized Chinese companies have shifted to imports as China’s exporters grapple with rising costs. This phenomenon can be proved by the information proved on Alibaba’s online platform.
Popularity: 6%
China Economy
China, export, import, increase, shift
On July 7th China Oilfield Services Ltd (COSL) decided to offer 85 kroner a share in cash to buy Norwegian company Awilco Offshore ASA (AWO). The offered price is 18.7 percent over the closing price of AWO shares on July 4.
COSL owns and operates the largest and most diverse offshore fleet in China, including 75 support vessels and four oil tankers, five chemical tankers, 8 seismic vessels and 4 geotech survey vessels. Besides, it operates 15 drilling rigs, including 11 jack-ups and 3 semi-submersibles while operating 1 leased jack-up rig. AWO is an international offshore drilling contractor owning and operating 5 jack-up drilling rigs and 2 accommodation units, another 3 jack-up drilling rigs and 3 semi-submersible drilling rigs under construction, and an option of constructing 2 semi-submersible drilling rigs. The combination of COSL and AWO would create the world’s eighth largest rig fleet, consisting of 34 operated rigs (including rigs under construction) with operation and growth opportunities in most major international markets.
CFO of COSL said that the company is seeking assets in Southeast Asia, the Middle East, Africa, North America and Russia. And the company statement said that AWO’s modern high-specification rigs and cutting-edge technology for offshore drilling was a good strategic fit for COSL pursuant to its globalization and growth strategies. The company’s profit were up 98 percent to 2.24 billion yuan in 2007 on rising business revenue, with four of its main businesses, including drilling, marine and transportation, oilfield technology and geophysical survey hit record high.
China, the world’s second largest energy user, has stepped up its search for oil and gas at home and abroad to sustain its fast growth.
Popularity: 6%
China Business News
AWO, COSL, drilling, energy, rig fleet
With an increase of 5.1 percent compared with the end of December, China’s foreign debt rose to $ 393 billion by the end of March. According to the State Administration of Foreign Exchange (SAFE) such a phenomenon attributes to the growth in short-term debt, which indicates the risk of influx of speculative capital that expects yuan appreciation.
The SAFA said on Friday in a statement that the short-term accounts for 60.3 percent of the total foreign debt, amounting to $236.7 billion, with an increase of 88 percent, or $18.97 billion by the end of March. While the medium and long-term debt rose by $2.3 billion in the first quarter to $155.9 billion, making 39.7 percent of the total foreign debt.
Guo Tianyong, economist of the Central University of Finance and Economics explained “the increase in the proportion of the short-term borrowing may be related to the speculative hot money inflows,” “although the short-term borrowing look like normal debt, as it is included in the official statistics, the capital can be used for some speculative purposes”.
Guo also explained that official statistics show that China’s foreign currency lending has been rising in recent months, which is the main reason for the continual increase in short-term borrowing. Some banks, especially foreign ones, have borrowed from overseas to lend to domestic enterprises. “Some of the lending may be used for speculative purposes”.
As the yuan has kept appreciating, the speculative capital is estimated to flow into China in a accelerated pace, the total amount of which could be the same as China’s foreign exchange reserves.
Popularity: 6%
China Economy
foreign debt, increase, SAFE, short-term debt, yuan appreciation