Category Archives: Investment

New ArtTactic Podcast On Corporate Art Collection

ArtTactic has a great podcast available for download today, a discussion about corporate art collection featuring the Director of the JP Morgan Chase Collection, Lisa Erf.

The podcast can be downloaded here.

China’s Rural Areas Show Potential To Drive Future Economic Growth

“Seeds Of Change” Starting To Appear In Formerly Destitute Areas, Motivating Entrepreneurs To Develop Remote Countryside

China's rural areas remain far behind the wealthy east coast in terms of economic development. If entrepreneurs have their way, this will change over the next few decades

China's rural areas remain far behind the wealthy east coast in terms of economic development. If entrepreneurs have their way, this will change over the next few decades

For years, China’s hinterlands have benefitted little from the huge economic growth that has transformed the country’s prosperous east coast, remaining underdeveloped and relying mainly on agriculture mainly as a result of their remoteness and often harsh terrain. If an article in today’s Financial Times is accurate, though, the next few years may be seen as a turning point for the mainly rural provinces in China’s interior. As much of China’s future growth will (or should) depend on domestic consumption and investment rather than foreign exports, the country’s interior — with its plentiful and comparatively cheap land and labor and delayed development (making it something of a “blank slate” for business) — should, if development is done correctly, make it one of China’s main engines of economic activity for decades to come. While this is obviously easier said than done, a number of motivated Chinese entrepreneurs have set out to do everything possible to make rural China prosperous, and — given the right mix of time and incentive — they might just be successful.

From James Kynge in today’s FT:

Reforms in rural finance, the monetisation of agricultural land and social welfare appear poised to turn China’s countryside from an indigent backwater to a driver of national economic growth over the next five to 10 years…Goldman Sachs has invested successfully in a leading sausage-maker. Wahaha Group, China’s biggest beverage company, owes its buoyant earnings performance largely to the rural market, where it commands a 60 per cent share. Rural China has also been a main force this year behind the surging sales of cars with a capacity of under 1.6-litres.

The fact that China’s second- and third-tier cities are the country’s major hope for sustainable business is well established. But what about the country’s fifth- and sixth-tier cities? With the sweeping changes already brought about by land privatization (perhaps downplayed by Chinese media, but a revolution in itself) and rapid commercialization of rural areas like Hubei, Zhejiang, Jiangsu, Shandong, Henan and Shanxi (as designated by the FT), still relatively impoverished and underdeveloped areas, the next 10 to 20 years could prove a windfall as companies invest in large-scale infrastructure projects (wind & hydro power plants), rail, housing, farms and heavy industry. The effect on common people’s lives could (hopefully) be dramatic.

Much like America’s continued economic strength was built largely on the development of its interior, China’s best option for growth based less on exports will be to lift its central and western provinces out of the centuries-old poverty that remains a plague in many areas.

Luxury Car Sector Continues To Thrive in China

New Models, Stimulus Package Continue To Drive Growth In World’s Top Automotive Market Despite Global Woes

China is one of Audi's most reliable and profitable markets; As Chinese luxury auto brands emerge, will they retain their dominance?

China is one of Audi's most reliable and profitable markets; As Chinese luxury auto brands emerge, will they retain their dominance?

The sustained growth seen in the Chinese automotive market over the last year has shown that the vast Chinese market — vast both in size and in potential customers — still has plenty of room to grow. For luxury carmakers, who’ve had a tough year in markets like North America and Europe, recent figures that show Chinese buyers are still motivated to part with their cash are welcome, to say the least, as formerly reliable customers in the US and other major economies think twice before signing on the dotted line.

According to this Wall Street Journal Asia article, growth in the Chinese market has been unprecedented in recent months for foreign luxury automakers, and with the stimulus package — aimed at infrastructure projects — taking effect, companies like Audi (a favorite of China’s government elite), BMW (the flashy entrepreneur’s choice) and Mercedes (the mark of a true “sophisticate” in China) expect to see their fortunes continue in the years ahead:

Audi’s sales in China rose 37% in September from a year earlier to more than 15,000 cars, marking a new record level in terms of monthly vehicle sales, the Ingolstadt, Germany-based auto maker said.

In the January-to-September period, Audi’s sales totaled 108,859 vehicles in China, up 20% from a year earlier.

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Hong Kong Now World’s #1 Wine Auction Market, Surpassing London & New York

Sotheby’s Fine Wine Auctions Sell $8 Million Over The Weekend As Chinese Collectors Dominate In Hong Kong

Hong Kong is now the world's top wine auction market, having surpassed London and New York

Hong Kong is now the world's top wine auction market, having surpassed London and New York

This weekend, Sotheby’s began a five-day string of auctions in Hong Kong — continuing until October 8 — with auctions of fine wine from the cellars of two anonymous American collectors. Though one of the world’s newest hubs for wine, due to a combination of ending wine duties, encouraging mainland buyers to take part in wine auctions, and growing demand both in Hong Kong and in mainland China, Hong Kong has within a few short years become the world’s #1 auction market for wine, overtaking traditional leaders London and New York. From James Pomfret in Reuters:

“Asian buyers represented 99 percent of buyers in this two-day sale,” said the head of Sotheby’s international wine department Serena Sutcliffe. “Hong Kong has become Sotheby’s most important wine center, ahead of very successful auctions in New York and London,” she added in a statement.

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The Yuan’s Growing Global Reach: How Will It Affect The Art World?

Increased Interest In Buying “Portable China” By Domestic Bidders At Auctions Around The World Has Wider Implications

Economist Ha Jiming sees a fully internationalized yuan within the next decade

Economist Ha Jiming sees a fully internationalized yuan within the next decade

Today, a piece on the internationalization of the Chinese yuan by Ha Jiming, the chief economist at China International Capital, China’s largest investment bank, was published on Forbes.com. Ha believes that — within the next decade — the yuan will be a fully internationalized currency, and that the implications for this will be important and far-ranging:

Not long ago, China’s currency, the yuan, wasn’t traded beyond the country’s borders. Yet in the next 10 years, it will become fully internationalized and join the ranks of the world’s main reserve currencies, beside the dollar and the yen.

The global march of the yuan is an extension of China’s success since the launch of its economic reforms 30 years ago. The status of a currency is commensurate with the economic power of a country. The U.S. share of global GDP, for instance, increased from 10% at the turn of the 20th century to 20% after World War I, raising the dollar’s importance; the rise in Japan’s share of global GDP from 7% in 1970 to 16% in 1988 also elevated the yen’s role as a reserve currency.

[T]he internationalization of the yuan will benefit China in general by increasing the appeal of Chinese assets and pool of investment funds. This is similar to what happens when a company’s stock becomes a blue chip. International demand for yen assets increased significantly in the 1980s, as did global demand for U.S. assets at the turn of the century.

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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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Bombardier Awarded Contract For 80 “Super High Speed” Trains In China

Implications For Second- And Third-Tier Cities, Consumers Immense As High Speed Rail Set To Increase Connectivity

Bombardier's ZEFIRO technology features maximum operating speeds of 380 kph (Image courtesy Bombardier)

Bombardier's ZEFIRO technology features maximum operating speeds of 380 kph (Image courtesy Bombardier)

China’s already extensive, but in some places aging, rail system has benefitted greatly from the government’s massive stimulus spending over the last twelve months. Earlier this year, the New York Times noted that the Chinese stimulus plan — which targeted, among other infrastructure projects, highways and railroads — could likely be a key part of the development of China’s interior cities, many of which have yet to reap the same benefits of the country’s economic growth as their much larger, east-coast counterparts like Shanghai:

The [Chinese] stimulus plan, one of the world’s largest, promises to carry the modernity of China’s coasts deep into the hinterlands, buying the kind of great leap forward it took the United States decades — and a world war — to build, and priming China for a new level of global competition.

China will spend $88 billion constructing intercity rail lines, the highest priority in the plan. It spent $44 billion last year and just $12 billion as recently as 2004, said John Scales, the transport coordinator for China at the World Bank.

As 2009 nears its end, China’s investment in rail infrastructure has not slowed, and in fact remains relatively sustained, due to the size both of the stimulus package and the country itself. Recently, Bombardier Sifang — Bombardier’s Chinese joint venture — nabbed an enviable contract to sell 80 “super high speed” trains to China, a contract worth an estimated US$4 billion (27.4 billion yuan). From China Daily:

CSR Bombardier Sifang (Qingdao) Transportation Ltd, a joint venture of Canadian train maker Bombardier and CSR Sifang Locomotive and Rolling Stock Ltd, signed a 27.4 billion yuan contract with the Shanghai Railway Bureau, under which the company will build 80 high-speed trains.

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