China | Green World Investor

China India Trade Deficit rises to Sinister Heights of $27 Billion Officially and Much more Unofficially

3 Feb, 2012

China India Trade has been rising at very high growth rates over the last few years driven by the booming GDP growth in the fastest growing economies of the world. However India like other countries faces the mounting problem of a huge trade deficit with China which is growing all the time. Like Brazil ,USA this has become a major problem . Beside the official reported figures , there is a large clandestine trade takes place outside the normal channels. Massive imports from China go unreported to avoid excise duties and custom taxes. Both countries have corrupt officials and businessmen which facilitate trade without paying of taxes and duties. Unofficial Trade Deficit with China may be double the $27 billion reported in 2011.

Rising China and India Tensions

India and China are the Two Rising Global Behemoths with Relations between these most populated countries always being tense.Both countries share a similar history of colonization by Western Powers in the 17-20th Centuries and Independence being attained in the middle of the 20th Century.China and India also shared the same economic trajectory until 1979 when Market Reforms put China on track to become the 2nd largest economy in 2010.India also embarked on Reforms in 1991 and has started showing fast economic growth in recent times.The relations between these 2 countries are tense since the Border War fought between them in 1962.They have one of the longest borders in the world which is disputed.China recently upped the ante on claiming territorial rights over India’s North Eastern State of Arunachal Pradesh.

China’s Recent Provocations

Chinese provocations against India have been rising in recent times as the Chinese leadership wants to keep India off tilt.Here is a list of recent provocations against India

1) Stapling of separate visas for India’s citizens from the state of Jammu and Kashmir which is disputed with Pakistan

2) Trying to stall an ADB Loan to India’s state of Arunachal Pradesh

3) Support in Building Nuclear Reactors in Pakistan which regards India as an existential threat.It has also supplying Pakistan with missiles and fighter aircraft.

4) Denial of visa to India’s top ranking military official on flimsy grounds leading to suspension of military contacts between the 2 countries

5) Stationing of 11,000 troops in Gilghit Pakistan Occupied Kashmir (POK) which India regards as a part of its own territory and over which India and Pakistan have fought 3 wars

Many of India’s top companies like BHEL,L&T are being hollowed out by Chinese competition of low cost goods and super cheap financing. Power, Telecom equipment form a major chunk of imports while India is primarily exports resource like iron ore. So what is happening is that India is become a resource vassal economy of China (though it may sound simplistic) . China puts up big trade barriers for India’s value added exports like pharma and Information Technology while putting no hurdles for import of resources.With the rapid growth rate of imports , India is in danger of becoming dependent on China for a number of goods as its industries shut down in the face of competion.

China captures almost Half of the Power Equipment Market in India raising Concerns

India’s private players like Tata Power,Reliance Power and others are in the process of setting up massive mega coal plants using supercritical boiler technology.While L&T and BHEL,the two Largest Capital Equipment Companies have won a lot of orders,the sheer scale of Demand requires Huge Imports as well.Low cost Chinese equipment providers like Shanghai Electric and Dongfang Electric have won almost half of the power equipment orders raising concerns amongst the Indian administrators.

Solar Panels are a good example of one such good where Indian industries can’t compete in the face of Chinese subsidies to its own companies.

The Indian government is not going to impose any new duties on imports of Chinese solar cells. This is despite the petition by the Indian solar panel manufacturers to give a level playing field. Note Chinese solar panels have virtually destroyed the solar manufacturing industry in the West with big companies falling under the relentless price pressure where solar panel prices have gone down by 60% in one year. Only the Koreans seem to be standing up to the Chinese government backed top tier solar companies from China. The rest have mostly folded up and are facing survival questions including those from Taiwan. Indian solar companies were never that big and cost competitive anyway given the headstart and support of the Chinese backed companies. The price crash in 2011 has seen most of them close their factories as they can’t even cover their costs at the Gross Margin Level.

India China relations have never been that great on a geopolitical level with the 1962 War and unresolved border dispute in the north. Recently the imports of Chinese telecom equipment from Huawei and ZTE raised a massive ruckus with Indian telecom companies supporting the Chinese because of low cost equipment while security concerns were raised.

China has recently been in the news over Internet Espionage on defense and sensitive installations in India and USA. This has led to the high profile exit of Google from China.Recently a Canadian research organization revealed/alleged how Chinese govt backed hackers had broken into Indian embassy and government computers.This has made the Indian government wary of allowing Chinese equipment suppliers into India’s communication sector.Though both ZTE and Huawei’s equipment is much cheaper compared to Nokia Siemens,Alcatel and Ericsson , these companies face an uphill battler in India right now.

Rising Trade Deficit Concerns

India’s trade deficit with China is estimated to reach $60 billion by 2014-15, up nearly three-fold from $23 billion in 2010-11. Bilateral trade with China was $63 billion in 2010-11, with China accounting for $43 billion worth of imports.

“Participants at the inter-ministerial workshop were especially worried about forecasts that China could account for 75% of India’s manufacturing in the next five years, up from the present 26%,” the official said. The workshop was attended by officials of key ministries and departments, including finance, home and the department of industrial policy and promotion.

“Excessive dependence can be disruptive in case of strained relations,” said Narendra Sisodia, a defence analyst and former additional secretary of NSC Secretariat. In general terms, if a country that is supplying basic components to another stops supplies, it would hurt the importing country because its manufacturing will be adversely affected, he said. “Much also depends on whether a country has alternative sources of supply and how quickly those could be mobilised.”

Goldwind Wins 13 Wind Contracts in America as Chinese Extend Global Leadership, More Trouble for Vestas, GE

16 Jan, 2012

China,Goldwind,Wind Energy

Xinjiang Goldwind Science and Technology Co (Goldwind) is the 2nd biggest Chinese wind turbine producer and amongst the top 5 wind turbine companies in the world. Goldwind stock has been punished alongwith other Chinese wind turbine stocks as a fierce price war in the Chinese market has led to nosediving margins and revenues. There is massive overcapacity in the Chinese wind market as there are around 100 odd producers of wind turbines with 7 out of the 15 top global wind turbine makers. Chinese Government policies have been changed to weed out the smaller inefficient wind turbine makers, however the competition still remains quite high just like the Solar Panel Industry.

Other global heavywieghts like Vestas, Gamesa ,Suzlon are facing bankruptcy concerns as the 20-30% cheaper Chinese wind turbines take a big toll. Goldwind has been trying to expand internationally by doing an IPO to raise funds and has invested heavily in the North American market like USA which is the second largest wind market in the world. Its investments has paid off as it has managed to bag 13 wind farm projects and get marquee customers like Enel Green Power. The prospect of western wind turbine producers remains bleak given the Chinese expansion in Europe and USA.

Chinese Wind Energy Dominance

The Chinese have not only captured most of the top rankings of the biggest solar panel producers in the world,they have extended their lead into Wind Energy as well.7 of the top 15 positions in Global Wind Turbine Producers are Chinese according to a new ranking.Sinovel and Goldwind have become the No.2 and No.4 rankers in the world with more than 10% global marketshare each.Dongfang is the other top Chinese wind power company with a 7% marketshare.United Power is at 10.Other top Chinese wind energy companies are Mingyang,Sewind and XEMC China.

Goldwind IPO Story

China has massively increased its wind installations to become the world’s second biggest market in 2009 . It has also managed to cultivate its local home grown industry to join the ranks of top 10 world turbine makers. Foreign dominance of China’s wind market has completely disappeared as the share had declined to 5%. Now Chinese wind equipment makers are spreading their wings outside their overcrowded home market with APower planning a massive wind farm in Texas.Both Sinovel and Goldwind which are the two largest wind equipment producers are planning IPOs to raise more capital and increase their visibility. Goldwind which was planning a HK listing since January has got regulatory approval to raise $1.5 billion in Hong Kong making it one of the biggest green offerings in the world this year .

Chinese Green Companies Price Wars

Chinese Green Companies are being forced to look at overseas market for Profits as their Domestic Market is being ravaged by fierce price wars.Wind,Solar and even Smart Grid Companies in China compete mainly on price as technology is not the strong point for these companies.Lots of these small companies are promoted through provincial government bodies with massive capital and other subsidies.With excess capacity and little technology,there is little incentive for consolidation in the Green Industry with the attrition the only way out.Even the bigger players like Goldwind, Suntech and Jinpan are facing huge pressure from these low margin,low cost small companies in China.The fierce competition in the domestic market has forced these companies to look at foreign market to generate revenues and profits.While the solar companies have succeeded in this endeavor capturing a massive 50% global marketshare,Wind and Smart Grid companies are still struggling to expand outside their home market of China.

Wind Companies looking to Foreign Markets to Avoid Domestic Competition

Like Solar,China’s Wind Sector has seen a massive boom with China installing a huge 13 GW of Wind Capacity in 2009 which is 1/3rd of the global demand.The Wind Energy Market in China has witnessed the growth of almost 90 companies with little differentiation competing fiercely on prices.This has led to low to zero margins for most of these companies.Even bigger companies like Goldwind and Sinovel which rank amongst the top 10 global wind turbine suppliers are feeling the heat.The 2008 GFC only exacerbated this trend with even more price cuts.The wind farm operators in China like Longyuan,Huangeng have been the major beneficiaries of these price war

How Massive 1000 Megawatt Solar Energy Farms in Chinese Deserts will Boost 2012 Demand

16 Jan, 2012

China,Solar Panels

China add the most electricity capacity annually in the world at around 100 GW and its total electricity generation capacity is second only to the USA which it will surpass in the next few years. China is highly dependent on thermal power for its energy needs which is becoming scarce and expensive by the day. Not to speak of the big disadvantages of coal as a fuel which causes thousands of deaths each year. Solar Energy has now reached grid parity in many parts of the world thanks to the low cost cheap solar panels being made by Chinese solar panel producers. With many countries now thinking of putting an anti dumping duty on Chinese solar modules, the government is looking to boost domestic demand . Chinese solar panel Tier 1 players like LDK, Suntech, Trina and Yingli besides some others are the biggest beneficiaries of this new solar policy from China.

China is looking to set up massive 1000 MW solar energy farms in its desert regions of Qinghai, Mongolia ,Tibet and others .Some of these regions have the highest solar radiation in the world with over 2700 hours of sunshine. What this means is that solar power can be profitably be generated at 8c/ Kwh .Though higher than coal generate power , this price is constant for 30 years even as thermal, gas and other forms of fossil fuel will keep going up besides increasing carbon emissions. These massive 1000 MW farms can be now be built quickly as Chinese solar companies have massive capacity which can supply solar panels at a very cheap price of as low as 80c/ watt.

China raises Solar Energy Capacity Target to 50 GW from 20 GW in 2020

China’s Solar Panel Manufactures have enjoyed a massive boom phase though domestic solar electric capacity has failed to keep up.China has been rewriting its renewable energy plan in the wake of the Fukushima Nuclear Energy Disaster in Japan.Note there has been a strong global backlash against nuclear energy around the world and 7 nuclear plants in Germany have been closed all but in name.Other countries like South Korea,Italy,Switzerland are rethinking of what do about their nuclear reactors giving the massive tail risks with nuclear generation.China had a target of only 20 GW of solar by 2020 has decided to raise the target by 150% to 50 GW according to the country’s leading energy planning authority NDRC.Note China installed more than 15 GW of Wind Energy in 2010 alone becoming the world’s largest Wind Energy Market by far.Solar Energy strongly lags Wind in China despite China having the biggest solar panel manufacturing industry in the world.Its Golden Sun and other Solar Subsidy programs have been small in absolute terms compared to its huge electricity capacity.Note Wind Power in China has reached a saturation level with almost 18 GW installed in 2010 ,with such a high level further growth looks quite difficult.

3 Signs of Trouble for Chinese Wind Energy

1) Sinovel has canceled shipments of Electrical Control Systems (ECS) for its Wind Turbines from American Superconductor due to high inventory levels and refused past payments as well.With the biggest Manufacturer of Wind Turbines reporting inventory problems,the situation of the rest can’t be that good

2) The Chinese National Energy Bureau was considering tighter procedures that would include requiring local governments to get the written approval before going ahead with wind projects with installed capacity of less than 50 MW.Earlier it used to be more than 50 MW

3) Hundreds of Wind Turbines have not been connected to the Power Grid due to lack of capacity or transmission lines.China emphasises on investment without factoring in returns is one cause of these orphan wind turbines.

Qinhai to build 1 GW solar power plant

The government of Hainan Tibetan autonomous prefecture and GSF Capital signed amemorandum on Sunday, planning to build a 1-GW solar power base in this underdeveloped prefecture and bring abundant electricity for the local people.
The country plans to build solar power plants mainly in Tibet, Inner Mongolia, Ningxia,Gansu, Qinghai, Xinjiang and Yunan.

How Chinese Module Makers will use the Taiwanese Cell Producers to Circumvent US Anti-Dumping Policy

14 Jan, 2012

China,Solar Energy

The USA and China are locked in a bitter tiff over solar panel imports from China. Note Solarworld filed a petition with the ITC which in all probability will put an anti-dumping duty on Chinese solar modules. Other countries whose solar panel producers have been swamped by the super cheap Solar Panel imports too are thinking of special custom duties. However the big Tier 1 Chinese solar panel makers are not sitting idle . They have already come out with strategies to circumvent the US Solar Panel Duties if they are imposed .

Solar Trade Wars are becoming the norm in the globe these days with the major one between USA and China.The instigator is the German solar company Solarworld which helped started the ITC Case in the USA. India too is thinking of putting some kind of import duty to protect its domestic solar panel producers which are dropping like flies. Chinese solar panel producers have swamped the world with super cheap solar modules. though a part of their low prices can be explained by competitive advantage, another part is due to the labor, capital subsidy given by the Chinese government. It would not take a rocket scientist to say that some of the biggest Chinese solar companies are insolvent and would be dead within a month without Chinese state loans.

Chinese Solar Companies like Trina,Yingli and Suntech will use 2 strategies

1) Set up solar module plants in the US and use cells made in China by their factories. Building a 50 MW solar module plants hardly costs much money . They can also outsource it to plants in Malaysia and Canada

2) Buy Solar Cells from Taiwanese Solar cell makers which have huge capacities without the competitiveness of the Chinese solar panel makers.Note Taiwan does not have strong low cost integrated solar players like China. They also lack the heft of the South Korean chaebols like Samsung and LG. So they can be easily exploited by the Big Chinese Solar Companies.

Taiwan’s Solar Energy Industry has shown the fastest growth after China in recent years.The country’s leadership in the Solar Industry was led by Motech which was once a top 10 Solar Cell Producer.However the recent financial crisis had hit the island nation’s solar industry very hard with Motech and E-Ton facing a massive erosion in profits and revenues.With the recovery in the solar industry in 2010..The Strong Solar Demand Tide has lifted all boats even the uncompetitive ones.,Taiwan remains largely a cell producer.Compared to the integrated Chinese producers like Trina,Yingli,LDK and others,Taiwanese Solar Makers are vulnerable to sharp price cuts.They depend on European customers who are largely uncompetitive and would face huge pressures with the decline in the German market.Chinese producers have much lower costs due to their vertical integration which currently most Taiwanese lack

Chinese companies increasing order in Taiwan

Taiwan’s solar industry has seen increases in orders reportedly from China-based firms that are trying to avoid possible tariffs resulted from the US anti-dumping and anti-subsidy investigation.Taiwan-based solar cell makers have raised capacity utilization rates recently, with industry observers speculating that rush orders from China-based peers have been the cause of the rise.The orders may be increasing but the benefits may not be as good as thought, the observers said. China-based solar firms have been demanding prices similar to those of China-made solar products, which are lower than the production costs of some Taiwan-based firms, the observers explained.

China’s Hot Money Outflows , Reduction in Forex Reserves May Indicate Coming Slowdown

14 Jan, 2012

China

China has reported the first decrease in its forex reserves in a qtr since the 1998 crisis. The Chinese Foreign Exchange Reserves which are humongous at over $4 trillion has shown a $100 billion decrease in Nov and Dec 2012 .While the sharp decrease in the Euro may account for some change , there is also anecdotal evidence that the hot money is flowing out of China . Note earlier Hot Money was pouring into China given the potential of yuan appreciation but with the potential of a Chinese Hard Landing ,the opposite may be happening . China has a distorted economy heavily dependent on exports and investment for growth . However changed macro economic conditions make this model unsustainable . How China manages to transition out of this investment export fueled condition is an open question . That they must is in no doubt nor the fact that China’s 10% GDP growth days are definitely over.

Chinese Trade Partners USA and Europe can no longer manage the massive deficits and strains are rising with some goods already facing disputes .Most famous is the Solar Panels while other Goods like Wind Turbines, Cars etc. have also seen signs of a Trade War. China under huge pressure appreciated the yuan by around 8% in 2011 from the US. In the current scenario when the profit margins of the small industries in China evaporting and potential for unreset (already happening ) , the situation remains dangerous . A Hard Landing not out of the question and people betting on it have already made money in 2011 without any serious decline happening till now.

China also faces a major change in 2012 with the top leadership of the country going to new leaders and the old set will go away.This means new policies and directions amidst major challenges to the Chinse economy and society.

China faces multiple challenges in 2012

1) Slowdown in Europe and USA means that their exports are sputtering and manufacturing has already started contracting

2) Protests in cities and villages grows against rampant corruption and land grabbing by Communist officials.Lack of democracy means violent protests at times.

3) Debt is becoming a huge problem with local government vehicles facing trouble as they can no longer raise money from real estate sales which has fallen by 20-25%

4) Massive industrial overcapacity is being exported outside.This has made the other trading nations put duties and curbs.A big trade war with USA cannot be ruled out.Chinese solar and wind products faced countervailing duties and dumping charges.China has already imposed high duties on US car imports.

China will take measure to stabilize its exports and imports as slowing global growth creates a “grim situation” for trade, said Zhang Xiaoqiang, a vice chairman at the nation’s top economic planning agency.

“Downward risks for the global economy are increasing,” the National Development and Reform Commission’s Zhang said at a forum in Beijing today. “The difficult situation will make competition for product exports among countries fiercer.” China will take steps to stabilize and improve trade policy, including the lowering of import taxes for some consumer goods, helping smaller businesses get financing and keeping its currency “basically stable,” he said.

China FE reduction

China’s foreign-exchange holdings reached a record $3.27 trillion in October and then fell in the following two months, the central bank data showed, indicating a decrease of $92.6 billion in November and December.

Much of the decline may be due to a lower value of the reserves held in currencies other than the U.S. dollar, said Cui Li, a Hong Kong-based economist at Royal Bank of Scotland Plc who previously worked at the International Monetary Fund.

Why Chinese Solar Market Exponential Growth in 2012 will help only Domestic Panel Producers

11 Jan, 2012

China,Solar Energy,Solar Panels

China’s solar market growth has hit the rocket phase in late 2011 with the announcement of the long awaited national Feed in Tariff . Many of the Chinese utilities have set up large solar farms utilizing the cheap solar panels produced by Chinese solar panel companies. Note Chinese solar companies are the dominant players in the world having almost killed the western solar industry in the last couple of years. With cheap costs and massive government support, China is almost ruling the solar industry globally . In the domestic Chinese market they have even a bigger advantage given the local home conditions and preference of domestic companies . Note China become home to the biggest wind turbine companies when China enacted the domestic content requirements in 2006. With the solar industry , the Chinese government does not need this law as its companies already possess massive advantages over the foreign competition.

Note the only large project in Ordos which was awarded to US solar company First Solar is gathering dust in the last couple of years. This project was opposed by major local panel makers like Trina, Yingli and others. With First Solar the cheapest solar panel producer in the world itself unable to compete in China, there is absolutely no hope for the competition. With expectation that Chian will become the largest solar market in 2012 , foreign solar companies can draw no succour.

First Solar’s Showpiece 2000 MW Solar Plant in Inner Mongolia gets Stalled by Chinese Protectionism

.This was hyped by the Chinese and USA media as the dawn of a new cooperation with the world’s two biggest economies in the Green Energy area.However,its already August 2010 and there is no sign of any activity.Washington Post has reported that the Inner Mongolian Government has having second thoughts about the building of the plant.Note China is already being acknowledged as the CleanTech Leader by US companies with even world class companies like Honda scouting China for Battery Technology.China’s low cost solar panel producers like Yingli,Trina and Suntech have captured a huge amount of global marketshare from the US and European companies.Some of these companies have lobbied the Ordos government to put the huge project on tender rather than just awarding it to First Solar.Note First Solar has not managed to get a FIT deal from the Chinese despite numerous attempts.China’s Solar Projects generally see Cutthroat Competition with negative investor returns

Will China Dominate Global Wind like it is dominating Solar ; Europeans bleed while Chinese capture marketshare

In wind energy , China’s growth over the last 2-3 years has been awesome with more than 100% CAGR . It has helped in growing wind turbine manufacturers through domestic content requirements.Now that these companies have sufficient technology and are able to leverage their low cost advantages , China has removed the restrictions in Jan 2010 to attack other markets. Vestas the leading European turbine manufacturer like the solar makers has fallen into the red. The only way for these companies to survive is to move their manufacturing to Asia . Ultimately the technology will also follow ( Applied Materials has also move its R&D to Shanghai). Just like the semi and electronics industry,Europe will start looking like a marginal player in the global alternative energy industry. Despite strong domestic demand and policy support , the European industry has been outsmarted and outplayed by the Chinese.

China raises Solar Energy Capacity Target to 50 GW from 20 GW in 2020

China’s Solar Panel Manufactures have enjoyed a massive boom phase though domestic solar electric capacity has failed to keep up.China has been rewriting its renewable energy plan in the wake of the Fukushima Nuclear Energy Disaster in Japan.Note there has been a strongglobal backlash against nuclear energy around the world and 7 nuclear plants in Germany have been closed all but in name.Other countries like South Korea,Italy,Switzerland are rethinking of what do about their nuclear reactors giving the massive tail risks with nuclear generation.China had a target of only 20 GW of solar by 2020 has decided to raise the target by 150% to 50 GW according to the country’s leading energy planning authority NDRC.Note China installed more than 15 GW of Wind Energy in 2010 alone becoming the world’s largest Wind Energy Market by far.Solar Energy strongly lags Wind in China despite China having the biggest solar panel manufacturing industry in the world.Its Golden Sun and other Solar Subsidy programs have been small in absolute terms compared to its huge electricity capacity.Note Wind Power in China has reached a saturation level with almost 18 GW installed in 2010 ,with such a high level further growth looks quite difficult.

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