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December 2008

2 posts from November 2008

China's $586 billion Economic Stimulus Package

Summary: $586 billion will be invested in low-cost housing, road and rail infrastructure, agricultural subsidies, health care, earthquake recovery and social welfare (pensions) over the next two years. All capital spending of companies conducting business in China is tax deductible. All the measures aim at reducing the impact of the global slow down and achieving a 8-9% GDP growth in 2009. If the stitumus package works, commodities, oil, and construction equipment may stem the slide. Read more for details: China unveiled an economic stimulus program totaling $586 billion, aiming to bolster domestic demand and help avert a global recession. The announced sum represents about 16% of China's economic output in 2007, and is roughly equal to the total of all central and local government spending in 2006. The plan includes spending in housing, infrastructure, agriculture, health care and social welfare, and features a tax deduction for capital spending by companies. China's economy won't be able to absorb so much spending immediately: Economists expect one or two more quarters of slowing growth at a minimum before a rebound could take hold. Beijing has long held that economic growth of at least 8% is needed to provide the improvement of employment and... Read more →

What is Next in China?

Foreign direct investment in China has shifted from one area to another in China. It started with processing of apparel, toys, shoes and electronic products, then was joint ventures of manufacturing plants, outsourcing from China, insurance companies and banks fought for business licenses, next VC and PE firms showed up and are getting more and more active in the local market, asset management and brokerage firms are also starting to look for opportunities and waiting for the approval of their license and some companies set up their R&D centers to China. After all this, what is next in China? It seems like everybody is there. What are companies looking for in China next? Most multi-nationals entered China for strategic purpose in the first stage. They were not certain about the market yet, nor were they sure if they could make any money at all. To their surprise, China changes fast in the fast 10 years. A few examples. No credit in China until recently. People carried cash in a brief case to purchase a car. Mortgage became available to consumers not long ago. More and more Chinese are able to own homes. The multi-nationals' investment is paying off after 5... Read more →