Tag Archives: Business

Australia and China: The Art & Business Connection

Rising Trade And Cultural Exchanges Between Two Countries Leading China-West Partnerships

Ambassador Raby has been a contemporary Chinese art buff since the 1980s. Could Raby and Rudd lead the way to better Sino-Australian ties?

Ambassador Raby has been a contemporary Chinese art buff since the 1980s. Could Raby and Rudd lead the way to better Sino-Australian ties?

There have been several stories in the last few days about the relationship between Australia and China, two countries which have economically benefitted in alternating cycles through increased trade and commerce over the last 20 or so years. While Australia has a Mandarin-speaking PM who has shown a muted interest in deepening Sino-Australian ties, recent articles have indicated that the China stigma continues to play a role in business deals and politics.

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Coach Confident of Gaining Market Share in China

American Luxury Brand Bullish On Chinese Consumer Demand For Luxury Goods

FT has a brief story today on comments made by Lew Frankfort, Chief Executive of Coach, about the potential for competition between foreign and home-grown luxury brands in the growing Chinese market:

Lew Frankfort said the worldwide economic slowdown was set to raise further China’s importance to the luxury goods sector, not just as a manufacturing centre but, more significantly, as a growing consumer market.

While Coach announced in January that it would halve its rate of expansion in North America, reducing the number of annual store openings there from 40 to 20, Mr Frankfort said he was likely to accelerate development plans in China.

Speaking at the end of a visit to China, he said: “I am leaving this trip with a view that our numbers might be conservative . . . We see sophisticated [Chinese] consumers shopping and international brands thriving.”

Coach estimates that China will represent 10 per cent of the $25bn global luxury handbag and accessories market by 2010. The US group currently has 17 shops in mainland China, in addition to eight stores in Hong Kong and two in Macao.

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Is China Poised to Dominate the Electric Car Market?

Chinese Automakers Hope to Leapfrog the Competition

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Tianjin-Qingyuan: One of China's Hybrid/Electric Auto Frontrunners

Following up my last post on luxury SUVs, I noticed a rash of stories today about the opposite end of the automotive spectrum — the electric car. There has been a lot of chatter about Chinese electric cars in recent months, mainly brought on by Warren Buffett’s $232 million investment in BYD last October. Since then, there has been more talk on both sides of the Pacific Ocean about increasing production of electric and hybrid vehicles, not only for the environmental benefits they bring, but also to corner a lucrative new global market. As China’s automotive market is still relatively young, competition will be fierce between new Chinese automakers like Shenzhen-based BYD and Tianjin-based Tianjin-Qingyuan and the more established Japanese powerhouses and North American giants (if they manage to get their act together in time). No matter what, manufacturing electric and hybrid vehicles is big business, even if you just count the Chinese domestic market. And the Chinese government is making it clear that they think the country can become the world’s electric vehicle manufacturing epicenter and eclipse production from other traditional auto capitals. As the New York Times writes,

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Huawei Finally Coming to America?

Is the Company’s “Long March” Nearing its End?

It looks like the Chinese telecom giant Huawei might make its oft-delayed entrance to the US market, after what Forbes calls the company’s “Long March”:

For years, the Chinese networking and telecom vendor’s attempt to expand its U.S. presence has been held back in part by security worries stemming from its murky association with the Chinese government. But now, the Shenzhen-based company is said to have won a major U.S. deal: a contract to build the network infrastructure for a cellphone service that Cox Communications plans to launch later this year. Huawei is also a contender to build Clearwire’s 4G network.

I’m keeping a close eye on this story, since making big deals in the US is never an easy task for Chinese multinationals — also, Recent chatter from Britain indicates that British authorities have serious concerns about allowing Huawei to install telecom infrastructure. As the Times points out,

A confidential document circulating in Whitehall says that while BT has taken steps to reduce the risk of attacks by hackers or organised crime, “we believe that the mitigating measures are not effective against deliberate attack by China”.

(…)

A Whitehall report is understood to warn that, although there is at present a “low” risk of China exploiting its capability, “the impact would be very high”.

So who knows? The US contracts might be a financial windfall for Huawei. Or, as was the case in their attempted 3Com deal and Haier’s abortive Maytag deal, security and/or protectionist concerns might threaten to scupper the whole deal. With the British report coinciding with Huawei’s American overtures, it could, quite possbly, go either way.

The Implications of the Yuan Appreciation

The evolution of China leads to internationalization of the yuan

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Wang Guangyi: "Great Criticism Series" 1993 painting 200 x 200 cm

In December of last year, the Chinese economic publication Caijing introduced a new economic experiment conducted by the Chinese government in the Pearl River Delta — China’s go-to destination to test-drive new capitalistic ideas. To simplify foreign trade, the government began a pilot program to allow foreign trade exchanges to be conducted with the Chinese yuan rather than the previously-dictated dollar or Euro. This development, Caijing pointed out, is an early indicator of how the yuan is increasingly becoming a global currency:

The RMB took a step toward becoming an international currency…Currently, foreign traders denominate sales in foreign currencies, such as dollars and the Euro, and have to go through the State Administration of Foreign Exchange to change currency. This brings added risk from fluctuations in foreign exchange rates.

Since then, Caijing has posted a more thorough “roadmap for yuan internationalization,” written by Ye Xiang, a former official at the Hong Kong Monetary Authority. While Ye feels that the yuan could prove a stable international currency in the long run, he is more pragmatic about the time it would take for the currency to become more widely used or perceived as “the” global currency.

We must understand that it is an inevitable trend that the overseas yuan investment market will grow after foreign trade settlements in yuan become widely accepted…[W]e should let companies engaged in imports and exports adjust their yuan positions via banks to allow development of the overseas yuan monetary market. Gradually, a yuan investment market will take shape.

Is the yuan’s internationalization running parallel to China’s evolution as a global player? In other words, as China’s position in world affairs grows, will the same be said of its currency? If the yuan does indeed significantly appreciate against the dollar and China’s new Pearl River Delta experiment succeeds in making the yuan more of a global currency, will it magnify the global demand for Chinese assets such as consumer products, real estate, luxury goods, art, etc.?

Tough questions with no clear answer, particularly because the Chinese government’s exact intentions for the yuan remain so opaque. Also, it is hard to tell whether the government is in a hurry to see the yuan appreciate against the dollar during the current financial crisis, since China’s exposure to the dollar and US Treasuries is so high.

UPDATE 3/30: BusinessWeek throws in their two cents:

The yuan’s emergence as a major currency will take “certainly not years; it’s more likely to be decades,” said Simpfendorfer at Royal Bank of Scotland. He said it could depend on whether Chinese consumers step up spending in coming years, giving other countries a reason to use yuan the way free-spending Americans drove the dollar’s popularity.

UPDATE 4/1/09: The Financial Times weighs in on the subject:

Beijing has…been taking cautious steps to make its currency more internationally relevant. This week, [Zhou Xiaochuan, China’s central bank governor] signed a Rmb70bn ($10bn, €7.7bn, £7.1bn) currency swap deal with Argentina, designed to allow the Latin American nation to settle some trade bills in renminbi. It followed swaps with South Korea, Malaysia, Indonesia, Hong Kong and Belarus.

There is much substance to Mr Zhou’s proposals. Arthur Kroeber of Dragonomics, a research company in China, argues that Beijing is staking out a responsible position whereby it seeks a multilateral alternative monitored by a multilateral body. It does not want to challenge the dollar but is serving notice that, over time, the world should diversify from overdependence on one currency.