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4 posts from February 2012

Change of Landscape of Foreign Direct Investment (FDI) in China

According to the Economist Intelligence Unit's most recent research, China is witnessing a shift of its foreign direct investment (FDI) landscape. The obvisous trends are first of all, FDI is moving towards service sectors and meanwhile away from manufacturing; second, with the coastal market getting crowded and saturated FDI is looking into the inland for cheaper labor and faster-growing markets. While some FDI may decide to choose countries such as Vietnam, where labor costs are lower than China's coastal regions, majority of them will still find China attractive for the opportunities its less developed inlands may offer, and most important, the significant potential of the comsumption the domestic market has displaying with increasing disposal income. Download China FDI _ EIU Read more →

Chinese Local Governments do not Need to Pay back Loans to Big Banks

Chinese local banks received $1.7 trillion of loans from government-controled banks as part of the stimulas plan designed to cope with the financial crisis. As the loans are approaching their maturity in the next three years, the local governments are getting concerned because most of them are cash strapped, while the big banks becoming nervous that they have to write off significant amount of bad loans, which will make their balance sheet look terrible. Here comes to the good news. Guess what, the central government decides that the local government does not need to pay back the loans, which will make big banks' life much easier. For more details, please read Jim Jubak's blog " China Kicks the Can again". Read more →

China Overtakes Europe for the First Time in Venture Capital Deal Volume

In 2011, China received VC financing of $6 billion for 332 deals. Europe completed 274 VC transactions for a total value of $6.1 billion. The U.S. still remains far ahead of the second and third place with 3209 deals receiving a total $32.6 billion financing, according to Isabella Steger on Wall Street Journal's Deal Journal. China has reached parity with Europe in venture capital financing for the first time ever. According to data from Dow Jones VentureSource, in 2011 Chinese companies received $6 billion in venture capital equity financing, up 8% from the previous year, compared with $6.1 billion in Europe. That’s a sharp drop for European start-ups, who until 2009 were still receiving 86% more in venture capital financing than their Chinese counterparts, and 20% more in 2010. In country rankings, that puts China in second place. In third place was the U.K., where VC financing for firms fell 32% year-to-year to $1.7 billion, though the U.S. remains, far, far ahead, where VC financing rose 10% year-to-year to $32.6 billion in 2011. In terms of deal volume, the U.S. leads with 3,209 deals, China is in second place with 332 and the U.K. third with 274. This is the... Read more →

FEW would deny that China has been the economic superstar of recent years. Thanks to its relentless double-digit annual growth, it has become the world’s second-largest economy and in many ways the most dynamic. Less obvious is quite what the secret of this success has been. It is often vaguely attributed to “capitalism with Chinese characteristics”–typically taken to mean that bureaucrats with heavy, visible hands have worked much of the magic. That, naturally, is a view that China’s government is happy to encourage. But is it true? Of course, the state’s activity has been vast and important. It has been effective in eradicating physical and technological obstacles: physical, through the construction of roads, power plants and bridges; technical, by facilitating (through means fair and foul) the transfer of foreign intellectual property. Yet China’s vigour owes much to what has been happening from the bottom up as well as from the top down. Just as Germany has its mighty Mittelstand, the backbone of its economy, so China has a multitude of vigorous, (very) private entrepreneurs: a fast-growing thicket of bamboo capitalism. These entrepreneurs often operate outside not only the powerful state-controlled companies, but outside the country’s laws. As a result, their... Read more →