Category Archives: Economics

Shanghai Developer Plans Luxury Home Furnishing Store “With A Twist”

Ausen Real Estate Development Set To Invest US$22 Million In Luxury Home Furnishing Retail Complex, Due To Open Next Year

Ausen World will bring a Western-style furniture shopping experience to Shanghai

Ausen World will bring a Western-style furniture shopping experience to Shanghai

While announcements of new large-scale real estate projects in China are nothing new, nor are they particularly exciting on the whole, Ausen Real Estate Development Co.’s recently-announced plans to open a massive home furnishing retail complex near Shanghai next year stand out. Set to be located in Xinbang, in Shanghai’s Songjiang District (less than an hour’s drive southwest of downtown), the austerely named Ausen World Brand Home Furnishings Center will include features not often seen at furniture stores, including a hotel and restaurant for shoppers who prefer to make a weekend out of their shopping trips. Although slapping a hotel onto a massive furniture store isn’t exactly unheard of, it most certainly is unusual.

According to company spokespeople, Ausen World‘s main focus will be on American and European furniture, popular but often poorly understood by Shanghai-area residents. The center will also include Premium home furnishing areas designed to emulate “DIY” stores like the Home Depot. From Furniture Today:

Another unusual feature for a Chinese retail center will be the presence of on-site interior designers, who can help consumers with home design and product choices.

In a statement, Ausen said it intends to be a door to the Chinese market for Western brands. It will offer help with operating in the country, including support of import entry, logistics and storage.

Zhang said he believes the center will offer a “family feel” that is missing from most Chinese retail spaces, with a rewarding consumer experience for shoppers and their children. An Australian company will design the “eco-garden” look of the complex, including outdoor leisure areas.

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Peoples’ Daily: China Outbound Investments to Eclipse Inbound for First Time

Chinese Firms, Sovereign Wealth Fund Taking Advantage Of More Affordable Investments Overseas In Wake Of Economic Slowdown

Graphic by Erik Bethel

Graphic by Erik Bethel

Chinese investment overseas has been one of the major news developments of the last year. Although Chinese outbound investment is nothing new, particularly after the country joined the WTO in 2001, falling asset values abroad — along with a gradually strengthening yuan — have made overseas investment a major priority for the government (and its state-owned enterprises) as well as private Chinese companies.

If a recent article by China’s Peoples’ Daily is, indeed, true, it looks like outbound investments, at nearly US$150 billion, nearly triple last year’s amount of US$52 billion, will continue the dramatic upward trend we’ve seen them follow over the last 5 or 6 years.

As Erik Bethel (an excellent source on investing in China and Latin America) writes in Seeking Alpha, the People’s Daily article highlights some quotes by Fan Chunyong, the standing director of China Industrial Overseas Development and Planning Association, in which he says that the sheer volume of year’s outbound investments by China — which are, at nearly US $150 billion, for the first time higher than inbound investments — indicate that China is already  making a shift from a “manufacturer” to a “capital exporter.”

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BYD’s Wang Chuanfu Tops China’s Rich List On Heels Of Buffett Investment

Wang Jumps 102 Spots To Head The Hurun Report’s “Rich List”; Now Worth $5.1 Billion

BYD's Wang Chuanfu is now worth over US $5 billion, putting him at the top of China's "Rich List"

BYD's Wang Chuanfu is now worth over US $5 billion, putting him at the top of China's "Rich List"

Last week, we saw what the endorsement of a financial heavyweight like Warren Buffett can do for a little-known Chinese company, with the stock of Dayang Trands skyrocketing 71% following Buffett’s praises of the company’s bespoke suits. In the automotive sector, today China Herald (via Bloomberg) points out that Buffett’s investment in previously low-key Chinese battery and hybrid/electric car maker BYD has not only given the brand global visibility, it has made the company’s head, Wang Chuanfu, a very rich man and putting him at the top of the Hurun Report’s China Rich List beating China’s longtime #1, Zhang Yin.

[Wang’s] wealth jumped to $5.1 billion, exceeding Nine Dragons Paper Holdings Ltd. founder Zhang Yin’s $4.9 billion, according to an e-mailed statement from the Hurun Report today.

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Wynn To Seek $1.6 Billion In Hong Kong IPO: WSJ

IPO Follows Record Revenue In Macau Last Month And Indications That Beijing Will Loosen Visa Restrictions F0r Mainland Chinese

Macau, the "Vegas of the East," is bouncing back to life after a tough year

Macau, the "Vegas of the East," is bouncing back to life after a tough year

The Wall Street Journal reports today that Las Vegas-based casino operator Wynn Resorts is looking for as much as US$1.6 billion (HK$ 12.6 billion) “based on pricing set over the weekend for a Hong Kong listing of the company’s Macau assets next month.” This IPO could precede others by foreign casinos in Macau, as the article notes that Wynn competitor Sheldon Adelson may also be eyeing a Hong Kong listing for his company as it emerges from the global economic downturn — which put a sizeable dent in several construction projects that had been slated for the Venetian Macau last year.

The relatively quick rebound of the Chinese tourist (or, even more likely, Cantonese gambling enthusiasts from Hong Kong, Shenzhen and elsewhere in Guangdong province) has injected a much-needed dose of optimism among major companies in Macau, which depend greatly on the continued spending and investment of mainland Chinese visitors and companies as well as the capital and expertise of foreign casino operators like Wynn to keep the former Portuguese colony’s growing economy running smoothly.

Over the weekend, Wynn and its bankers set a price range of between HK$8.52 and HK$10.08 per share for the IPO, the person said. The company is offering 1.25 billion shares, equivalent to 25% of the equity of Wynn’s Macau operations, the person added. The company had earlier been expected to raise about US$1 billion in its offering.

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Fashion: From “Made In China” To “Owned By China”

Acquisition Of High-Profile Western Brands By Chinese Companies Gives Chinese Designers And Brands Broader Distribution Base

Pierre Cardin has become one of the most recognizable and coveted foreign brands in China since entering the market in 1978. Photo (c) CRI English

Pierre Cardin was recently acquired by a Chinese fashion company, boosting the popular brand's reach in the China market. Photo (c) CRI English

In the wake of the global economic crisis, several Chinese companies have gone on global shopping sprees, spurred by the one-two punch of a drop in luxury consumption in developed markets and a motivation to control the sale of high-profit luxury goods inside the Chinese mainland. Although China, as the world’s most populous nation, has a massive consumer base, much of that base remains far below the income level of regular luxury consumers, meaning domestic companies often experience a difficult conundrum — if they want to tap into the wallets of China’s 1.3 billion consumers, they generally have only two real choices — toss brand equity aside and focus on the lowest-price-point consumer or bring a foreign brand with much higher brand equity to China and target the emerging middle class and wealthy consumers. As a result, the transition from local to global (or maybe more accurately, glocal), seems natural. In the capitalism-on-speed world of China’s major metropolitan areas, either you go global or you’re crushed by your competitors.

This week, the subject of Chinese companies purchasing established western fashion brands was raised in a Reuters article (via Canada’s Financial Post), which focused on the delicate balance some major Chinese companies are dealing with at the moment — whether to try to purchase distressed foreign brands to sell in the brands’ existing established markets or simply to buy the brands then control them as they please within the Chinese market. There is no guarantee that consumers in developed markets will bounce back from the recession to spend as freely on luxury goods and haute couture as they once did, but at the same time the majority of Chinese consumers are not in the market for these goods. Additionally, Chinese fashion companies may not yet have the management experience necessary to oversee a western brand (or its employees) in its usual markets, so time will probably be necessary for Chinese companies to work out the kinks that would emerge down the road if they were to focus too strongly on overseas markets.

According to some sources — such as the exporter interviewed in the Reuters article — Chinese companies shopping for western fashion brands would be better off counting on the continued growth of the Chinese middle class, as this area should see sustained growth that may outpace the rebound of the consumer in developed countries.

After decades of Made-in-China garments, China’s fashion industry is keen to move on from being just a mass manufacturer of clothes. It now wants to own western brands and to sell them to China’s 1.3 billion consumers.

The right to sell brands of several international fashion labels locally, such as Aquascutum and Pierre Cardin, have been recently acquired by Chinese clothes makers and sellers.

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The Global Yuan: What It Means For Chinese Assets

China’s Monetary Policies Look To Favor Yuan, Gold At Dollar’s Expense: What Will This Mean For Art Collectors & Investors In “Portable China”?

Art Collectors and other holders of "Portable China" can benefit from the globalization of the yuan if they're in it for the medium- to long term

Art Collectors and other holders of "Portable China" can benefit from the globalization of the yuan if they're in it for the medium- to long term

Today, Business Intelligence looks into China’s monetary policies, and how they are increasingly favoring alternate investment vehicles like gold while putting a dent in the US dollar. For investors looking to diversify their holdings into a number of areas to lower risk and exposure to market fluctuations, what will the simultaneous increase in asset diversification, global economic jitters, the ascendance of China and internationalization of its currency have on those who put their money into Chinese assets? The article does a fairly good job of illustrating the long-term effects these market forces will have on these investors as well as China itself:

In a series of recent policy moves and announcements through official channels, or increasingly through indirect ‘economic ambassador’ addressing conferences or talking to western reporters, China’s intentions and ambitions are becoming clearer.

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Abu Dhabi Courting Chinese Businesses, Tourists

Abu Dhabi Making Chinese Business Travelers, Tourists Key Priority Following Reports That UAE Will Be Given Approved Destination Status

Relations between China and Abu Dhabi have improved greatly in the last decade, benefitting businesses (and soon, tourists)

Relations between China and Abu Dhabi have improved greatly in the last decade, benefitting businesses (and soon, tourists)

News that ties between China and the United Arab Emirates (UAE) are deepening are not new, but until now the seven emirates have not been a major destination for Chinese tourists or business travelers. Although this has changed in recent years, at least on the business side — as Dubai and Abu Dhabi in particular have drawn thousands of these travelers as commercial __ have deepened — Chinese tourists have had a difficult time procuring visas.

That may change now, according to reports that the UAE will soon be appointed as an approved destination by the Chinese government. This should open new doors for waves of Chinese tour groups to head westward, and Abu Dhabi’s tourism department will, undoubtedly, be waiting for these free-spending groups with open arms. Already the Abu Dhabi authorities have begun to promote the emirate in China:

The Abu Dhabi Tourism Authority, a participant of the two-day China Incentive, Business Travel & Meetings Exhibition, that ended in Beijing on Thursday, will establish dedicated MICE (Meetings, Incentives, Conventions and Exhibitions) divisions in its three offices established over a year ago in Beijing, Shanghai and Guangzhou. Abu Dhabi will also appear at the China International Travel Mart in November in Kunming.

“China is going to play a significant role in Abu Dhabi, reaching its goal of attracting 2.3 million hotel guests by 2012’s end,” says Dayne Lim, product development director of the Abu Dhabi Tourism Authority. “As China is also now a leading world manufacturing powerhouse we will also be looking to increase awareness of Abu Dhabi as a business tourism destination.”