Hong Kong Shares Go to First From Worst on China Economy Rebound By Kana Nishizawa - Sep 16, 2013 12:00 AM

Chinese economic data that beat forecasts this quarter spurred Hong Kong stocks to reverse course after posting an 8.2 percent loss in the six months through June. New credit almost doubled in August from July, easing concern that a lending crunch would curtail expansion in the world?s second-biggest economy, while equities rallied worldwide on signs growth is picking up.

" A lot of economic data have come in to show China?s not going to have a hard landing," said Jeffrey Shen, head of emerging markets at BlackRock Inc., the world?s largest asset manager. " Hong Kong is clearly the first place for international investors to put some money to work in China."

The Hang Seng China Enterprises Index (HSCEI), also known as the H-share index, last week entered a bull market after climbing 20 percent from its June low, and the Hang Seng Index erased this year?s loss. The measure of Chinese shares listed in the city trades at 7.8 times forecast profits, the lowest in Asia.

World Bank chief says China to meet 7.5% growth target   Published on Sep 15, 2013  3:28 PM

SHANGHAI (AFP) - China is likely to achieve its growth target of 7.5 percent this year despite planned structural reforms to rebalance the world's second largest economy, the World Bank president said on Sunday.

Mr Jim Yong Kim is making a four-day visit focusing on issues relating to carbon emission reductions and China's urbanisation push.

" We think the growth (for China this year) will be at about 7.5 percent," Mr Kim told a press conference in Shanghai on the first day of his visit.

" The data from August suggests that China will reach its goal of 7.5 percent."

China?s overseas plans acquire new urgency -  The old business model of ?economy of scale? no longer works

By Suranjana Roy Bhattacharya Special to Gulf News

Published: 15:34 September 13, 2013

Chinese policy managers are ultra-sensitive to capital flows. So when  currencies and markets of emerging economies got battered recently, due

to US quantitative easing, China remained relatively insulated due to its  strong capital controls and restrictions on foreign financial flows.

However, when it comes to its own brick and mortar ambitions, China is less draconian. Last year, there was a sizeable net outflow of capital from its shores, but the bulk of dollars taken out of the country was by domestic enterprises on international ?shopping sprees?. China?s outbound direct investment reached a record high of $87.8 billion (Dh322 billion) in 2012, making it the world?s third-largest outward investor, after United States and Japan, according to just-released data.

In recent years, the Chinese government has vigorously implemented a ?go global? strategy, driven by three imperatives ? need for energy security, need to upgrade and acquire technology and access overseas markets, while repairing its battered global reputation. Although there has been a robust growth of overseas direct investment (ODI) by Chinese companies, the volumes are far from impressive. By the end of 2012, accumulated ODI that Chinese companies had invested was only $531.94 billion, ranking China the 13th in the world.

This giant economy is now at a ?tipping point?. If it wants to develop to a higher level, Chinese companies must speed up the pace of going international. At present, their presence in high income countries is negligible, despite all the hype about Chinese acquisitions ? a remarkable situation for the world?s largest manufacturer and exporter.

Patchy record

The hype generated by China?s acquisitions had more to do with its state owned companies venturing into the closely-guarded energy sector. Since 2008, Chinese SOEs, taking advantage of financially stressed energy multinationals, started making spectacular bids. Despite success in Africa and South America, they ran into hurdles in North America. In 2005, Chinese oil explorer CNOOC had to give up a $18.5 billion bid for Unocal in the United States after political outcry. Similarly, in 2010, another state company Sinochem backed away from buying Potash Corporation of Saskatchewan in Canada. The one successful bid was the $15.1 billion deal by CNOOC for Canada?s Nexen in December 2012.

In the West, Chinese companies are usually portrayed as monolithic organisations with hidden ties to the government and thus meet with political resistance. In comparison, private companies are given more leeway and can avoid the hype and risks. Last year, privately-owned Chinese entities accounted for 14 per cent of overseas M& A deals, and are getting increasingly ambitious.

Private deals

The largest overseas M& A this year was carried out by Shuanghui International Holdings when it acquired Smithfield Foods in the US for $4.7 billion in May. Other large private deals in H1 included Sungate Trust?s purchase of a 40 per cent stake in General Motors building in Manhattan, New York WSP Holdings?, owner of WuxiSeamless Oil Pipes Company, merger with WSP OCTG Group, again in the US and China Fishery Group?s purchase of Copeinca, a Peruvian fish feed maker.

The participation of private companies in large overseas M& As is a vital channel for China to achieve industrial transformation and upgrade. Companies now see ODI as a way of overcoming skill, talent and technological barriers. Majority of the overseas deals carried out by Chinese companies in Europe and US, is driven by a desire to acquire leading brands, markets, experience and technology relating to the production process.

Market forces

Chinese companies have little option but to go abroad and evolve. The old business model of ?economy of scale? no longer works. They can no longer continue to produce low design, low margin goods because the domestic markets they serve now want brands and higher quality products. China has exceeded a per capita income of $8,000 ? a global benchmark when consumers demand better products and services. It?s a bottleneck situation, and the only way out for Chinese companies ? is to go out.

The writer is a freelance journalist based in China.