China | Green World Investor

Huawei and ZTE ban to be overturned as India gives in to lobbying efforts

2 Jun, 2010

India has agreed to allow telecom equipment manufacturing equipment from ZTE and Huawei after banning them due to security concerns.Hectic lobbying efforts by Huawei/ZTE,Chinese trade bodies and the Indian telecom operators has made the Indian government change its decision.As a face saving gesture, telecom equipment will have to be screened by international security audit firms.I think this change of mind was driven more by the powerful telecom lobby rather than pressure from the Chinese government or Huawei/ZTE .Chinese equipment is supposed to be 20% cheaper than comparable equipment from Western firms like Nokia Siemens and Alcatel which has made telecom operators a strongly interested party. India’s telecom regulation history has been one of opacity,controversy and corruption.The infamous 2G spectrum allocation to newcomers has generated a lot of heat for the government with losses due to incompetence,shady deals and possible corruption running into billions of dollars.This soft capitulation to the corporate interests has the potential to generate another storm.

India to allow Chinese gear after checks – report – Economic Times

India has agreed to allow import of Chinese telecom gear certified by international security audit firms, the Economic Times reported on Wednesday, to help mobile operators fend off possible delays.Top officials from the prime minister’s office, the home (interior) ministry, the telecommunications ministry and intelligence bureau took the decision, the newspaper said.

Industry officials have earlier said the Indian government has been blocking imports of equipment made by Chinese firms such as ZTE Corp and Huawei Technologies due to security concerns.The newspaper cited an unnamed official as saying the government would also allow self-certification of imported telecom equipment by mobile operators against a bank guarantee given to the communications ministry.Canada’s Electronic Warfare Associates, U.S.-based Infoguard and Israel’s ALTAL Security Consulting are among the international security audit agencies whose certification would be needed, the paper said.

China promotes its CleanTech Industry through Electric Vehicle subsidies

2 Jun, 2010

China,Electric Vehicles,Green Investing

China is already the world’s largest producer of Solar Energy Equipment with almost 50% of global marketshare and is looking to dominate the Wind Energy Industry as well.Now it is looking to extend its leadership to other sectors of the Clean Technology as well.Major global automakers are already looking to collaborate with Chinese companies in Lithium based Battery technology for Electric Vehicles.Coda Automotive a US based Electric Vehicle startup is going to use Chinese technology for setting up a Li Battery plant in Ohio.Honda and Toyota are also looking to collaborate with Chinese companies in setting up EV plants in China.

BYD is one of the world’s market leaders in Battery and Electric Vehicle Technology while other Chinese automakers like SAIC and Geely are also ramping up their Electric Vehicle plans.The Government subsidies for Electric and Hybrid Vehicles will give a further boost to Chinese companies which have substantial share of the Chinese home market.Note that China is already the largest automobile market in the world overtaking the US in 2009.It is on its way to become the Manufacturing and Technology hub of the next generation of the Auto Industry as well.Contrast this with the decay of Detroit which used to be the world’s Automobile Capital .

China to subsidize hybrid, electric car purchases – Reuters

China said on Tuesday that it would launch a pilot programme in five cities to provide subsidies to buyers of electric and hybrid cars, as the government steps up efforts to cut emissions in the world’s biggest auto market.Residents of Shanghai and Shenzhen, as well as Hangzhou and Hefei in the east of the country and Changchun in the northeast, would receive up to 50,000 yuan ($7,320) in subsidies if they buy plug-in hybrid cars, the Ministry of Finance said on its website.The maximum subsidy for those who bought fully electric cars was 60,000 yuan, the ministry said.

Taking cues from the government, the biggest players in the Chinese auto market, from top state auto group SAIC Motor Corp to rising star Geely Automotive Holding, have been ramping up efforts to bring low-emission vehicles onto the roads.SAIC plans to roll out its first hybrid car this year, while Shenzhen-based car and battery maker BYD Co, backed by Warren Buffett’s Berkshire Hathaway, started retail sales of its plug-in hybrid F3DM in March.The government would also allocate unspecified funding to bankroll the construction of charging stations and battery recovery networks in the pilot cities, the finance ministry added.

Seven Reasons that China’s Economy might be slowing down

1 Jun, 2010

China

China has been called the “savior” of the world’s economy as its massive $586 billion Government Stimulus and Easy Money policies sustained over 10% GDP growth in 2009 even as the world GDP was contracting for the first time in recent history.However China’s huge stimulus has created problems of inflation and asset bubbles which threaten to slow down the world’s “Growth Engine” . This combined with the Greek Contagion has raised the fears that a “double dip” world recession could be just around the corner.China’s leadership is also wary of a second global downturn. However a bubble in the real estate has forced the hand of Chinese authorities which are trying to cool down the red hot “real estate” sector.The reasons that China’s economy which has averaged around 7-8% GDP growth in the last 30 years might be slowing down are listed here

Real Estate is a Bubble - The Chinese real estate is in a bubble with real estate prices growing far in excess of Chinese income levels.Though the real estate is not driven by a debt fueled boom like the US and other developed countries , nonetheless avg real estate prices / average income levels would suggest that the real estate prices are poised to come down sharply.Chinese authorities are using both monetary and non-monetary tools to bring sanity to this market
US and European Export markets are slowing down – China’s growth has been a export driven growth like those of other Asian Tigers.However its main export markets of Europe and US are going to see sub-par growth in the next few years due to a debt driven excess.Europe’s Austerity measures and a low Euro is not an ideal situation for China’s export industries .
Pressures on Yuan growing – China is facing an ever increasing chorus from countries around the world to appreciate the yuan which is artificially suppressed through currency controls.Some think tanks suggest that the yuan is 40% undervalued to its fair value against the dollar.With countries seeing their domestic markets shrink,everyone wants to export more and import less to repower their economies.An undervalued yuan is a trigger for trade wars.
Foreign MNCs feeling discriminated against – China’s protectionist policies has led to an alienation amongst the foreign companies doing business in the country.Rio Tinto’s much publicized China corruption case and the Google abandonment of China has brought this issue into the limelight.Foreign countries are reevaluating whether China’s huge market is worth the discrimination they face vis-a-vis domestic companies
Banks and Local Government have huge unaccounted liabilities - China’s corporate structure runs large based on patronage networks of government owned banks , state owned companies and provincial authorities.This frequently leads to misallocation in capital which shows up in the forms of NPAs.Local governments compete with each other for projects giving out huge subsidies and incentives which are funded mainly through local land sales.With real estate prices crashing and profits of export industries being pressurized , this is another bubble that may crack.
Chinese Stock Market is down the most among major markets in 2010 – The Chinese stock market has been the worst performer among major economies with the interest rate increases and real estate bubbles making investors wary.Note this by itself is a poor indicator of economic health as stock markets are generally poor predictors of economy in the short run
Chinese wages are going up – There has been a lot of social unrest and suicides in China as wages fail to keep in sync with the rising productivity.Recent suicides at Electronics Giant Foxconn and strikes at Honda are indicative of this trend .Low wages which are China’s biggest competitive advantages may no longer remain one for much longer.

Asia Stocks Fall on China’s Manufacturing Report; Ringgit Drops – Boomberg

Chinese manufacturing expanded at slower pace in May, raising concern imports by the world’s fastest-growing major economy is easing. “There seems to be a worry that China’s strong economic expansion may be held back, and that may affect countries that depend heavily on China’s demand,” said Lim Chang Gue, a fund manager at Samsung Asset Management in Seoul, which manages $30 billion. “Also, if economic figures in troubled European countries turn out to be clearly deteriorating, that could add anxiety to the markets.”China’s Purchasing Managers’ Index dropped to 53.9 from 55.7 in April, seasonally adjusted, the Federation of Logistics and Purchasing said, less than the median 54.5 estimate in a Bloomberg News survey of 18 economists.

China to keep yuan stable – Chinese Commerce Minister

23 May, 2010

China,Europe,USA,World Economy and Markets

The sharp appreciation of the yuan against the Euro and the other currencies would make China think of depreciating the yuan against the dollar rather than expectations of appreciation by most non-Chinese Countries.The 15% Euro depreciation due to the Greek Contagion has had a devastating effect on low margin Chinese companies which run on paper thin margins.To think of appreciation in such a situation would be suicidal for the authorities as they would face mass unemployment from the export industries going bankrupt.For example Chinese solar companies are facing huge foreign exchange losses due to Euro depreciation.US Treasury Secretary Geithner is living in a fantasy world if he thinks the Chinese are going to listen to him on loosening currency controls.

As Europe falters, China balks at revaluing yuan – Yahoo

After nearly two years of keeping its currency stable against the U.S. dollar to help exporters like Li weather the global financial crisis, hopes had revived overseas that Beijing might relax the dollar peg soon. But as the European debt crisis deepens, China is signaling it will hold back on any changes — a stance likely to complicate high level talks next week with the U.S.

The latest, most authoritative comment on that came from Commerce Minister Chen Deming, who told reporters while visiting Austria this week that Beijing intends to keep the yuan stable. Meanwhile, U.S. Treasury Secretary Timothy Geithner confirmed that the contentious currency issue is bound to be on next week’s agenda.

“I think it is, of course, China’s decision about what to do with the exchange rate — they’re a sovereign country,” Geithner said. “But I think it’s enormously in their interest to move, over time, to let the exchange rate reflect market forces, and I’m confident that they will do what’s in their interest,” he said while visiting Boeing and other exporters in Washington state.

China reported a $196 billion global trade surplus last year, adding to pressure to tilt its economy toward greater reliance on domestic demand.

Will China “Devalue” Yuan against the Dollar?

17 May, 2010

China,Europe,USA,World Economy and Markets

The Euro’s rapid 15% decline against the Euro has had an important side effect against the Yuan which is pegged to the dollar.While currencies around the world are depreciating against the dollar due to “safe haven” trade,the yuan remains immune,due to its peg to the dollar.Europe is China’s biggest export market throwing a number of its companies in peril due to the Greek Contagion . A 15% movement in currency makes it very difficult for a company to adjust particularly if it is running on paper thin margins.A Chinese company with 10% margins which exports solely to Europe has the potential to go bankrupt if the situation sustains for a long time.

I think it might not be inconceivable for the yuan to devalue against the dollar for the Chinese to save their massive employment generating export industries. Note unlike a lot of the US companies , most of the Chinese exports are commodities which have much lower margins. Another direct effect has been that it makes the Europeans industries more competitive . However I think the weakness in Euro is not a singular event rather it will be followed by more seismic changes in currency.Managing currency risk is becoming more important for export industries than managing their operations these days.

Europe’s Debt Crisis Is Casting a Shadow Over China – NT Times

The pain of the European debt crisis is spreading, with the plummeting euro making Chinese companies less competitive in Europe, their largest market, and complicating any move to break the Chinese currency’s peg to the dollar.

Chinese policy makers reached a consensus last month about breaking the dollar peg. But allowing the renminbi, which is also known as the yuan, to rise against the dollar now would mean a further increase in the renminbi’s level against the euro, creating even more problems for Chinese exporters to Europe.

The euro has plunged against the renminbi in recent weeks, at one point Monday reaching its lowest level since late 2002.

The steep rise of the renminbi prompted a Commerce Ministry official in Beijing to warn Monday that China’s exports could be threatened. The official’s comments, the most explicit yet on the implications for China of Europe’s recent financial difficulties, suggest that even the world’s fastest-growing major economy, and increasingly the engine of global growth, is not immune to the crisis that started in Greece and threatens to spread across much of Europe.

“The yuan has risen about 14.5 percent against the euro during the past four months, which will increase cost pressure for Chinese exporters and also have a negative impact on China’s exports to European countries,” Yao Jian, the ministry’s spokesman, said at a news conference in Beijing, according to news services.

Have US and Europe already Lost the Green Industry Leadership to China

13 May, 2010

China,Climate Change,Europe,Renewable Energy,USA

China is recognized as the manufacturing hub of the world due to its low cost of labor and capital coupled with the pro industry policies of the government.These advantages are now being leveraged by the country to establish leadership in Green Energy which many recognize as the next Big Industry . Despite rhetoric from Obama , US had done precious little to help the renewable energy in the US except for some off and on tax credits and grants. Compare this to China which gives electric subsidies,cheap billion dollar loans and a steady supply of cheap labor. In solar China has already captured almost 50% of the world marketshare and is on its way of doing it in Wind as well.

Europe has been the biggest loser due to their distorted wage/productivity which is leading to mass migration of companies from Europe to Asia.US never had any big base due to its lax climate policies.However US is far ahead of Europe in terms of innovation.Most of the new technology and process innovation is coming from the Silicon Vally.Companies like First Solar,NanoSolar,Enphase,Solaria,American Superconductor and many others showcase the hotbed of technology that US is.But the manufacturing leadership is going to China and with that the technology might migrate there as well like Applied Materials.

Europe on the other hand does not have technology nor manufacturing except in the case of Germany.Like in Semiconductors, Europe seems destined to remain a bit player in the Green Industry of the future.US has a chance to take back the leadership backed on its technology might but for that the government has to become more proactive .

U.S. lags China on climate change: Europe climate chief – Reuters

The United States’ future as a global economic power depends on what it does to fight global warming and it is lagging behind other countries like China, Europe’s climate chief said on Wednesday.

European Commissioner for Climate Action Connie Hedegaard told Reuters it was a positive step for the United States to have “finally” unveiled legislation to combat climate change on Wednesday.

“This is one of the crucial battlefields over who is going to be the economic leaders of our century,” Hedegaard said of the fight against global warming.

Democratic Senator John Kerry and independent Senator Joseph Lieberman presented a long-awaited climate bill on Wednesday, which aims to cut planet-warming emissions by a 17 percent in the next decade.

While President Barack Obama supports the legislation, it has slim chances of passing unless Kerry and Lieberman win over a group of moderate Democrats and Republicans.

“It’s not something an ordinary European citizen would say ‘Wow, that’s really ambitious,’” Hedegaard said. “On the other hand, we know that the United States has been among the later starters, so the important thing now is to get started.”

The 27-nation European Union has long claimed to be a world leader in the fight against climate change.

While the United States and China bicker in negotiations for a new global deal to combat climate change, Hedegaard said Beijing was making great strides against global warming.

“The irony is that in the real world outside the negotiation rooms they are just moving,” she said of China’s efforts to fight global warming. “They are just doing it and they are doing it big scale.”

Hedegaard praised the United States for including a cap and trade system for reducing carbon pollution by electric utilities and factories in the new climate bill. She said such a system had worked in Europe and China was also considering such a move.

Negotiators from 194 nations will gather in Cancun at the end of the year to try to build on the Copenhagen accord signed last December with the ultimate aim of reaching a legally-binding treaty that would set the tempo for global CO2 cuts over the next decade.

“There is this feeling now that there is something to build upon,” Hedegaard said

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