Briefly…Top Ten Tweets (From Manipulation, Ratings & IPOs, To Cities, Consumption & Labour Woes)

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Welcome to our China business week in review…

China keeps growing, and we keep an eye on by how much…the latest in a long line of projections came from the IMF, with an estimate of 10.5% for 2010 (a bit ahead of the 10.1% Goldman Sachs estimate last week). But it is not just GDP that is growing, foreign reserves were reported to be up by 15% to US$2.45 trillion, while the trade surplus for June was US$20.02 billion, the highest this year, and up 140% year-on-year. Bloomberg reported that “exports surged 43.9 percent compared with a year earlier and import growth moderated for the third month, rising by 34.1 percent”.

Although the US again decided against calling China a “currency manipulator”, these figures are unlikely to please those who have been pressing for a more rapid appreciation of the now de-pegged RMB.

Perhaps wallowing in that US displeasure (and all the foreign exchange) a Chinese ratings agency, Dagong International Credit Rating Co. (according to AP) “rated Washington below China and 11 other countries such as Switzerland and Australia due to high debt and slow growth. It warned the U.S. is among countries that might face rising borrowing costs and risks of default”. Some have already had a go at rating Dagong’s independence…

Whatever the relative ratings, it is clear that China has money to invest, and the government has announced that it will spend US$100 billion in a continuance of the “Go West” and stimulus policies. The China Post reported: “President Hu Jintao said the following decade is the key period for further developing the country’s vast western regions…In 10 years, the western regions should be built into the country’s bases for energy resources, resource processing, equipment manufacturing and for the country’s emerging industries of strategic importance”. When the leadership talks like this, it is worth taking note.

While the western regions are getting big government offers, Shanghai is getting big government ones, and the China Economic Review (noting a PwC report) noted that China will be the biggest IPO market this year – and will also boast the biggest IPO: “Chinese firms are expected to raise over US$73.8 billion through initial public offerings this year, making China the world’s biggest IPO market…all eyes remain on Agricultural Bank of China which is expected to raise between US$20-US$30 billion in a dual listing, in Shanghai and Hong Kong, in what is expected to be the world’s biggest ever IPO”. The market is still a bit of a casino, but high-profile listings like this one tend to get high-level support…

As always, the number is China are staggering. But we tend to get used to them after a while. This is a danger is such a fast-moving place, so prepare to start using a new number for the population by 2015: 1.4 billion – with the majority, for the first time, being urban. The People’s Daily reported: “Li Bin, director of the National Population and Family Planning Commission, said the population on the mainland will reach 1.39 billion by the end of 2015, among which as many as 700 million people will be living in urban areas…China’s urbanization rate was 46.7 percent in 2009 and it is expected to reach 50 percent around 2012”. The impact of this urban growth on business, especially in lower-tier cities is likely to be huge, and is yet another reminder that businesses need to engage effectively beyond the traditional, developed markets.

Of course not all 700 million urban residents will be consumers of luxury, international brands…but recent research shows that young Chinese already account for some 25% of luxury spending globally. A report in the Independent notes: “The People’s Daily…reports that China’s luxury consumption accounts for 25% of the global market, and the World Luxury Association 2009-210 report revealed that Chinese consumers accounted for a quarter of Gucci group’s sales worldwide”. Chinese shoppers are already big (perhaps the biggest) spenders in London’s (high-end) West End, and more businesses are starting to tailor their offerings to these inbound buyers as a first step to market.

The domestic market may be appealing but, as we have noted before, it is not without challenges. Over the past few months Google has been experiencing a lot of them, and it is still suffering from its (lack of) strategic planning. Paul Denlinger wrote in the Business Insider that: “By taking an uncompromising stance on censorship with the Chinese government, Google made it very hard, if not impossible, to sit down and negotiate with any Chinese government…No matter how you looked at it, this was a poor negotiating strategy, making a climbdown for both sides almost impossible, and an uneasy confrontation unavoidable”. Even thought Google got its ICP license renewed, it is not out of the woods. Others can learn useful lessons from Google’s mishaps.

Among a number of other ongoing challenges for international (and local) businesses in China are labour activism, strikes, pay and conditions. We have covered news of these before, but a useful summary of sources is provided by China Beat, which concludes: “While it’s too early to assess the impact of these strikes, it is clear that migrant workers have gained a level of organizational sophistication and political awareness to make demands for higher wages, better working conditions, and in some cases, elections for union representatives.” This subject matter is required reading for anyone with a China business or supply chain. Everyone?

Just as we have reviewed the week gone past, others have looked ahead…The FT’s beyondbrics blog suggested that “All eyes will be on China this week – with GDP, inflation and production figures out on Thursday [15 July]. As if that wasn’t enough – AgBank goes to market too – debuting on the Shanghai market the same day, and in Hong Kong on Friday [16 July].

We’ll be reporting all that on Twitter, as it happens, and will review it next week. In the meantime, see all the original news and links below…

Urban planning in China
Photo link

1. RT @chinability: IMF raises China’s 2010 GDP growth projection to 10.5% [People’s Daily] (see also: RT @thesinoglance: China’s foreign reserves rise by 15%…reached 2.45 trillion US dollars by the end of June…; RT @CHINA_NEWS: Exports Hit Record in China, as Trade Gap Surges 140%…

2. RT @chinahearsay: Latest China Hearsay: Obama Administration Says China Not A Currency Manipulator

3. Dagong gets Moody… RT @thesinoglance: Chinese credit firm declares US worse risk than China…on government debt

4. Going West RT @TweetChina: US$100-billion investment set for struggling west China – China Post

5. China: the biggest IPO market RT @chinaeconreview: Mainland IPOs to raise $74b this year (See also: And an IPO… RT @ftchina: AgBank on course for record $22.1bn IPO

6. @BullishChina China’s population set to reach 1.4 billion by 2015 – People’s Daily Online (see also: RT @CHINA_NEWS: China to recruit 6.5 million census-takers…

7. @christinelu “Young Chinese account for 25% of luxury sales” [Independent] — as in global luxury sales. (See also: Interesting from CCB’s Guo Shuqing RT @BeyondBrics: Chinese consumers: spending more than it seems?

8. Cat & mouse… RT @pdenlinger: My article on Google in Business Insider: Google Is Still In Big Trouble In China $GOOG

9. @MalcolmMoore Excellent @chinabeat roundup of what to read to understand China’s labour situation. 4:25 AM Jul 5th

10. All eyes on China… RT @BeyondBrics: Week ahead July 12 – 18

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