Edinburgh-based Scottish Widows Investment Partnership — sadly known as Swip — is to launch a commercial property fund in China over the next two years.

The company itself is renowned in Britain for the way it ran an advertising campaign. The advertisements showed the Scottish Widow, plainly having been widowed at an untimely young age, looking positively scrumptious in her widow’s weeds. The latest model to don the cloak is Hayley Hunt, from Virginia Water in Surrey.

There is no suggestion that this epic campaign will be used in China, more’s the pity. Instead fund management group Swip, which already has about $14 billion of its $194 billion assets invested in UK and overseas property will be investing in China.

Leading the drive will be Malcolm Naish who joined Swip as head of property last year from DTZ Investment Management.

Swip’s plans are at an early stage, with the company talking to potential partners, including developers and investors who have a knowledge of the local market in China.

Malcolm Naish said: ‘I suspect we’ll invest in more developed markets on the Eastern seaboard of China, such as Shanghai, but that depends on which partners we find.

‘When you go into a market such as China you need access to the right people who understand how the system works. . . .

‘We’re currently assessing what cycle in the market China is at.

‘We’re more likely to launch institutional funds in the first instance, but we’re open minded about retail funds.’

He added: ‘Some property fund investors took fright last year but those who have ridden through this storm should see sensible returns over the longer term.

‘The current downturn looks different from those in the mid 1970s and 1989-90. The economy is more stable, for example.’

Swip is drawn to China include its growing and urbanizing population and high GDP, 9% per annum between 1995 and 2005, compared with 2.7% in the UK.

Not many UK fund managers have commercial property funds investing in China.
Source: The Scotsman

National Australia Bank bought 20% in Union Trust and Investment Limited, making it the first foreign investment in China’s trust sector.

The investment by nabCapital, NAB’s capital markets and institutional banking division, makes the bank the third largest shareholder in UTI. Neither party revealed the price for the transaction.

nabCapital’s CEO John Hooper said, ‘With UTI’s focus on property this deal represents an opportunity for NAB to bring our expertise in structured financing to China’s burgeoning market.’

NAB is one of the largest listed financial institutions on the Australian Stock Exchange and has strong experience in structured property finance, which brings together property, finance, equity capital markets and cooperative finance.

John Hooper said, ‘Our cooperative venture will concentrate on developing new products, particularly in infrastructure and construction - two tremendous growth areas in China. The bank will have a chair on UTI’s board and several other top management members in charge of risk management.

John Hooper is still quite optimistic about the country’s real estate sector, but shows little interest in investing in China’s banking sector.

He said, ‘For the time being, we have no plan to buy a stake in China’s commercial banks’ although he added NAB would like to be a more ‘active’ investor in the banking sector.

One of the largest attractions of UTI, according to John Hooper, is the company is relatively small, with high growth potential and sound corporate governance.

According to Wang Xichao, UTI chairman, the partnership will help the company explore creative businesses in QDII, infrastructure trusts, pension products, REITs and real estate trust funds.

In 2006, the company was one of two trust companies approved by the central bank to run REITs, on a pilot basis.
Source: China Daily

China received $74.7 billion in foreign direct investment in the non-financial sectors last year, ahead of all developing countries for the 15th successive year.

The Ministry of Commerce said the figure reflects a year-on-year increase of 13.59%.

Total foreign direct investment (FDI) — including capital flows to the financial sectors such as banking, insurance and securities — was $82.7 billion in 2007, up 13.8 % from a year earlier.

Wang Zhile, director of the Multinational Enterprise Research Center affiliated to the Ministry of Commerce, said, ‘The growth is higher than my expectations. It shows China’s role as a crucial link for multinationals’ global manufacturing, purchasing and research.’

This year may well be a bit different.

Income tax rates for domestic and foreign companies were unified at 25% from the beginning of 2008. Prior to this, domestic companies paid 33% income tax while foreign companies, which benefited from tax waivers and incentives, paid an average of 15%.

The effect will be considerably muted by the fact that foreign companies registered before the new rates took effect will pay tax at the preferential rate for another five years.

It is true that foreign investors are also paying more for labor and material costs, such as oil, plastics and steel, and face tighter policies on polluting and resource-intensive industries. On the other hand, China has, by a considerable margin, a more attractive manufacturing climate — not using that in the weather sense — than any country in the west and this is likely to last for many more years. It is expected that China will continue to be a magnet for foreign development and investment as Beijing’s policies to woo foreign investors and open up continue.

Wang Zhile said, ‘The Chinese leadership assured foreign investors at the 17th Party congress late last year that China will stick to its reform and opening-up policies. It is taken as a good opportunity by many foreign investors.’
Source: China Daily

The illustration is of a woman praying at Longhua Temple on the second day of the Chinese Year of the Rat. Traditionally The Year of the Rat marks a period of conquest – which is possibly what business leaders have in mind

William Hess, Beijing-based analyst for Global Insight, says: ‘The government has taken a liking to the concept of national champions, and wants to see globally competitive Chinese firms emerge in the sectors that it associates with national strength. This certainly includes the automotive sector, pharmaceuticals, and natural resources.

‘I expect to see more acquisitions by financial firms, and efforts by the government to position its homegrown technology-related firms as global players — especially in networking equipment with companies like Huawei, and in mobile phones.’

Lenovo’s finance chief Wong Wai-ming said that the computer giant will be pursuing acquisitions this year. ‘We have cash and virtually no borrowing. We also have the track record to raise the necessary debt equity. It there is the right investment opportunity, we are capable of doing it and we will do it.’

So far, there have been two types of Chinese international expansion running in parallel. A strategic expansion, and a knowledge expansion. The first expansion involves government-backed moves to secure supplies of resources like iron ore, oil, and coal, and to invest Beijing’s vast sovereign wealth fund.

The second involves smaller Chinese companies seeking out Western assets — often distressed ones — to acquire expertise and technology.

At last month’s Detroit Motor Show, the world’s biggest, there were five Chinese carmakers displaying their models. The car-makers do not match Western-style quality control. But then neither did the Japanese three decades ago.
Source: Daily Telegraph

Chinalco has invested in Rio Tinto in Australia to the tune of $15.5 billion. Chinalco chief Xiao Yaqing visited Australia to reassure the locals that it had no intentions of taking over Australia. This did not stop the Australian press running the story as a warning of what could happen to Australia. And in those stories there was, regrettably, a racist element.

To quote The Age, which was more restrained than the rest, ‘Of course, it’s just two words that strike fear about Chinalco — ’state-owned’.’

Prime Minister Kevin Rudd flick passed the responsibility to the Foreign Investment Review Board for discussion.

The Rio share purchase, was made through a Singapore-registered company called Shining Prospect, and gave Chinalco 12% of Rio Tinto.

On its site Chinalco reveals: ‘Aluminum Corporation of China Limited, which is under the care of Central Party Committee and the support of various ministries, native government and party committees. . . . Aluminum Corporation of China is an investment management institution and holding company authorised by the state. It is one of the key state enterprises managed by the Central Government directly.’

Now the rumor is that the Chinese Government has provided Chinalco with ‘a $US120 billion war chest — a $US120 billion financial reserve in support of the company’s bid for Rio Tinto, against BHP Billiton’.

Then came the sting in the tale which showed, clearly, the Australian attitude towards investment by China. ‘Little wonder Mr Xiao turned up in Sydney with such a fine wardrobe of Italian suits.’

Such a comment has never been made about, say, an executive of Microsoft coming to Australia to view the software scene it totally dominates. Nor would it have as a heading: ‘Rio stake could be first step in a long march.’
Source: The Age

The Prudential was once one of the most famous and trusted brands in Britain. The ‘man from the Pru’ was a loved figurehead for the company. Recently the company’s image has been more than somewhat tarnished and its worth diminished on the stock market.

It is possible that Ping An, the second largest insurer in China, is preparing a move on Britain’s second biggest insurance company.

The Chinese company has raised £11bn in the country’s biggest share sale to help it finance a foreign acquisition strategy, and it has Prudential firmly in its sights because of its extensive Asian interests.

It is unlikely that it will be a bid for 100% of the company but Ping An could take a strategic stake and use it as a base to move in on some British finance houses.

The rise of state-backed foreign enterprises or sovereign wealth funds (SWFs) is impacting most on debt-laden western economies, ready and able to unleash serious money to buy a share in world trade.

With investors in short supply due to the credit crisis, balance sheets under pressure and stock markets taking a tumble, many western companies have been forced to look east for finance, and to these giant funds in particular.

According to a report from Asia-oriented bank Standard Chartered, these SWFs already hold $2.2 trillion and this could reach $13.4 trillion over the next 10 years.

Asians divide opinion between those who see them as saviours and those for whom they are a threat to national security. Up to now, western companies have been happy to take the money on offer so long as the investors keep their holdings to a relatively minor stake, typically no more than 10%.

Gerard Lyons, group head of global research at Standard Chartered, said, ‘A protectionist backlash against strategic investments is real and threatens global trade. We are more likely to see western governments seeking to protect national champions and strategic sectors. Already this is happening in the US, with more signs of a hardening of stances across Europe.’
Source: Scotsman

Europe’s biggest bank, HSBC, has opened a wholly owned subsidiary in rural China the first foreign lender to do so.

Hubei Suizhou Cengdu HSBC Rural Bank, or more simply HSBC Rural Bank, will offer deposit services to local businesses and individuals and provide loans to agricultural companies.

Other foreign players including Citigroup and Standard Chartered Bank have also shown interest in the nation’s underdeveloped regions, encouraged by the government as it tries to reduce the growing income gap with cities.

With 22 staff and registered capital of RMB10 million, the HSBC subsidiary plans to provide loans to individual farmers next year.

Vincent Cheng, HSBC’s chairman said at the opening, ‘We are extremely pleased to be the first international bank to enter the country’s rural market. There is tremendous promise for economic development in the rural areas. We believe that HSBC’s global network and expertise will help unlock new opportunities for China’s rural population as well as for the bank’s business in this fast-growing, but still largely untapped market.’

Covering an area of about 6,900 sq km, the county-level district of Cengdu in central China has a population of two million and largely relies on export-oriented agriculture.

There has been increased enthusiasm for foreign-funded banks in China’s rural market since banking authorities lifted restrictions in October, approving villages and townships for a pilot scheme.

HSBC has also sent experts to Kaixian County in Chongqing Municipality and plans to open another village bank there, according to the county government.
Source: China.com

Lou Jiwei, Chairman of CIC said in London that China’s sovereign assets fund, China Investment Corporation (CIC) will serve as a stabilizing factor in the global financial market with its long-term investment strategy.

Lou Jiwei, who controls a US$200 billion investment fund, said, ‘We will adopt a long-term and prudent investment principle and a safe, professional portfolio strategy that adapts to market changes, which will put emphasis on a rational match of returns and risks.

‘Judging from our investment strategy and scale, we are unlikely to present a major impact on the international market.’

That is because one-third of CIC’s US$200 billion was used to purchase Central Huijin Investment Company while another third is being put aside to be invested in state-owned banks that are to be restructured into joint-stock companies. The remainder of the capital, some US$70 billion, is available for overseas investing, Lou told the London City’s financial leaders at a banquet given in his honor. The new sign of the City of London is shown in our illustration.

He said, ‘Even the 70 billion dollars must be invested by batches, in a wide range of portfolios, over which we do not seek control.’

He said CIC is more than happy to learn the managerial expertise and best practices of financial institutions, including those in the City of London, particularly the proven experiences concerning sovereign wealth funds.

Lou Jiwei said, ‘As a manager of sovereign wealth funds, I do not expect the over-use of national security as a pretext for investment protectionism and financial protectionism to damage the stability of international economy and finance.’

Lou is leading a six-member delegation on his three-country tour. After his three-day Britain visit, he will go to France and Singapore.
Source: China View

BusinessWeek has a serious and well-balanced article by Ken DeWoskin, senior advisor to PriceWaterhouseCoopers, professor emeritus at the University of Michigan and a co-founder of the Wharton International Forum in Shanghai, on China’s investments overseas.

Setting the scene the article reminds us that in 2007, China will surpass the US as the world’s second-largest exporter, and in 2008, it will surpass Germany, the largest. By the end of September, China had exported nearly US$900 billion in goods.

All of this has happened in about 30 years: then China was entirely disengaged from the global trading system. Now it is all on an upward climb.

Between October 2006 and June 2007, China’s reserves soared US$330 billion to reach US$1.33 trillion, and now stand at nearly US$1.5 trillion.
As export growth rate reached 28%, the current account surplus expanded to 9% of GDP.
The pressure in China is growing, both to drain liquidity from the domestic economy and find more profitable uses for its forex reserves.

The China Investment Corporation (CIC), was formally launched October 1 with US$200 billion in assets.

It will follow in the footsteps of Singapore’s two sovereign funds and also learn from the experiences of other domestic entities like China Development Bank (CDB) and the CITIC conglomerate.
For the full article click on Source.
Source: BusinessWeek

Nasdaq has opened an office in Beijing , a move that will let it step up efforts to attract more Chinese firms to list on the exchange.

Stock exchanges around the world are trying to lure Chinese firms to list with them as investors seek to capitalize on the rapid growth of the world’s fourth-largest economy.

Nasdaq trades the shares of 52 Chinese companies with a combined market capitalization of $57 billion.

Guang Xu, Nasdaq’s managing director for Asia, told a news conference that 19 of them have joined Nasdaq so far this year, compared with nine in 2006, and there will be at least one more listing by the end of 2007.

Guang Xu described the 2008 pipeline of initial public offerings of Chinese firms as strong, especially for energy-related companies, but declined to put a figure on it.

Nasdaq itself will consider listing its shares in Shanghai if China changes its regulations to permit listings of foreign companies.

However, Nasdaq and similar international markets such as the Growth Enterprise Board in Hong Kong face mounting competition as China redoubles its efforts to build its own Nasdaq-style board.

Beijing has already promised to lift a moratorium by the end of the year on new foreign brokerage joint ventures.
Source: Reuters