world growth

world growth

Sunday, August 30, 2009

GM invests $293 million in China to make light trucks

GM China, China's FAW launch joint venture

SHANGHAI — General Motors China and state-owned automaker FAW Group Corp. launched a 2 billion yuan ($293 million) joint venture Sunday to make light-duty trucks and vans, initially for the fast-growing Chinese market.

GM said the joint venture will use two existing factories affiliated with FAW and have a capacity of over 100,000 vehicles. That is expected to double by the end of 2010, GM China Group President Kevin Wale told reporters in a conference call.

Plans call for building a new assembly plant in Harbin, he said.

China is a key growth market for GM, which is expanding here despite its difficulties in the U.S. market.

"Light trucks and vans have a significant role in China and other parts of the world," Wale said. "Adding trucks rounds out our vehicle portfolio in China. It's really a key focus for future growth."

The 50-50 joint venture, based in the northeastern Chinese city of Changchun, where FAW is also based, will make FAW-branded vehicles for the Chinese market, GM said in a statement. The venture might make GM-branded vehicles for export later, but the focus for now is on meeting demand in China, Wale said.

Production will be at the existing factories in southwestern China's Yunnan province, a facility owned by FAW-affiliate Hongta Yunnan Automobile Manufacturing Co. Ltd., and at Harbin Light Vehicle Co. Ltd. in the northeastern city of Harbin, GM said.

It said the two companies will conduct research and development, exports and after-sales support as well as vehicle production.

"Our new joint venture combines the expertise of two industry leaders in a partnership that benefits both," Nick Reilly, GM executive vice president, said in a statement.

"It will address demand in China and other markets for high-quality, affordable products in one of the industry's most robust segments, while complementing the portfolio of products that GM and FAW currently offer," Reilly said.

Discussions on the venture began in early 2007 and it obtained regulatory approval in July, GM said.

FAW, originally known as First Auto Works, was founded in 1953 and began production in 1956. It sold 1.53 million vehicles, including sedans, vans and trucks, in 2008.

GM's sales in China jumped 38 percent in the first half of this year, helped by strong demand for its minivans and other small vehicles. The automaker sold more than 100,000 vehicles a month in China from January to June for a total of 814,442, a record for any half year, the company said. That compares with sales of 1,094,561 GM vehicles in China for all of 2008.

Adding truck production will help expand the company's exposure in one of the few major markets that continues to grow.

"These are quite different customers and quite different products," Wale said.

He said he expected GM's commercial vehicle sales to reach 80,000 to 90,000 this year and to rise further next year.

Monday, August 24, 2009

China's Huawei ranked 3rd worldwide in the telecommunication equipment industry

Huawei Technologies Co., China’s biggest telecommunications equipment maker, has garnered a 10 percent market share in Europe and expects to gain more ground this year, a company executive said.

The Shenzhen, China-based company is targeting a “huge improvement” in Europe this year with a focus on wireless equipment, Tim Watkins, Huawei’s vice president for western Europe, said in an interview in London.

The company won $3 billion in contracts out of the $30 billion awarded in Europe last year, a 20 percent gain from a year earlier, with sales to “all major operators,” including Vodafone Group Plc and Telefonica SA, Watkins said. Closely held Huawei also made a “significant breakthrough” in the U.S., with a contract that is “by the nature of the customer and scale of network a very strong statement that Huawei is now entering the U.S. market,” he said, declining to elaborate.

Huawei’s gains defy the trend in the telecommunications- equipment industry that’s been hurt by falling demand and intensifying price competition. The Chinese company’s net income rose 20 percent to $1.15 billion in 2008, while its major rivals Ericsson AB and Nokia Siemens Networks both suffered an almost 50 percent drop in annual profit, and Alcatel-Lucent SA’s full- year loss widened by 48 percent.

Aided by its lower cost-base, Huawei now ranks third in the industry with a global market share of 14 percent, behind Ericsson with a 35 percent share and Nokia Siemens with 20 percent, according to Kulbinder Garcha, a London-based analyst at Credit Suisse Group AG.

U.S. Entry

“For Huawei, the only market left is North America, which could be more challenging, but I don’t see why it can’t have a long-term 18 to 20 percent share there,” said Garcha.

Huawei has been stymied in North America by security concerns. The company’s $2.2 billion joint bid with Bain Capital LLC for the computer-gear maker 3Com Corp. was withdrawn amid U.S. government concern that China would gain access to 3Com’s anti-hacking technology used by the U.S. Defense Department.

It’s a “misconception” that Huawei is linked to the Chinese government, said Watkins.

Huawei won more than five contracts in North America this year, according to Watkins, including a three-year fourth- generation wireless contract this month from the Kirkland, U.S.- based Clearwire Corp.

“It doesn’t mean all of a sudden the gate is flying open and everybody’s happy with Huawei, but the important thing is we are moving in,” he said.

Pricing Advantage

Telecommunications operators wanting to develop fourth- generation may get easier access to funding from Chinese banks working with Huawei, Watkins said. Huawei said it this year won trials to build the fourth-generation network infrastructure for T-Mobile International AG in Austria, and Vodafone in Germany.

The Chinese company also maintains a pricing advantage over its rivals, said Credit Suisse’s Garcha. Huawei had a net margin of 6 percent in 2008, which it plans to improve this year, while its competitors are “struggling to keep theirs above zero,” Watkins said. “This advantage enables us to invest more in R&D and gain further market share,” he added.

The cost of engineering for Huawei is between 15 to 16 percent lower than Ericsson or Nokia Siemens, Garcha said.

“Huawei has been very successful at expanding outside China, first emerging and now developed markets because they’ve got significant pricing advantages,” he said.

Huawei employs, mostly in China, about 40,000 engineers, almost double the number at Ericsson. That enables it to innovate faster than its rivals, Watkins said.

“It will take a long time for Huawei to reach the top because market shares in infrastructure don’t change that quickly,” Garcha said, “but it’s possible that within three to five years it’ll become the number two player.”

Tuesday, August 18, 2009

China signs $41 billion energy deal with Australia

SYDNEY — Australia has signed a record 41.3 billion US dollar deal to supply Chinese energy giant PetroChina with liquefied natural gas, officials said.

The agreement, which represents the biggest foreign investment in Australia, is for PetroChina to buy 2.25 million tonnes a year over the next two decades from ExxonMobil's Gorgon gas field.

"This agreement has enormous value for the Australian economy and society, generating the wealth we need to continue to develop our resources and technology, and sustain our communities," Resources and Energy Minister Martin Ferguson said late on Tuesday.

The deal comes a week after ExxonMobil signed a 25 billion dollar contract with India's Petronet, and despite troubled recent relations between Australia and China over the detention of a mining executive.

Foreign Minister Stephen Smith also told parliament on Tuesday that a "most unhappy" China had downgraded an official visit in anger at Australia's move to let exiled Uighur leader Rebiya Kadeer into the country.

However, Ferguson said the liquefied gas deal was a "landmark in our relationship with China."

"We are a country built on foreign investment and we continue to welcome investments that develop our resources for the benefit of all Australians," he said.

"PetroChina is an increasingly important partner in the Australian LNG industry and I hope the relationship will be long and successful."

Thursday, August 13, 2009

iPhone finally goes on sale in China, Apple's profit should soar

I am sure there are plenty iPhone knockoffs in the Chinese market already.

China Unicom is banking on an iPhone frenzy this September, as the mobile service provider has bought five million of the handsets from Apple, according to IB Times. The $1.46 billion (about 10 billion yuan) inventory buy comes just about two weeks after the companies reportedly signed a three-year deal that gave China Unicom exclusive rights to sell the iPhone in China.

While full terms of the deal are still unclear, the consensus is that the China Unicom arrangement won't be nearly as profitable for Apple as its partnerships with cell phone companies in other countries, since it doesn't include sales subsidies.

China Unicom will sell the 8G iPhone for about $350 (2,400 yuan) and the 16G for about $700 (4,800 yuan); IB Times' source estimates that Apple will generate roughly $100 per unit in profit, a sharp contrast from the $400+ it has been estimated that Apple gets from AT&T (NYSE: T) (including monthly kick-backs over each 2-year contract) per iPhone sold here in the U.S.

But given the competition the iPhone will have in China (from established smartphones, fake iPhone clones, and Dell's rumored phone with China Mobile), Apple likely had to concede in some areas so that it could take its first crack at the Chinese market.

Saturday, August 8, 2009

China's industrial production may overtake US faster than expected

A nice analysis from WSJ, by their prediction, China should over take US in industrial output by 2015.

China's Gains in Manufacturing Stir Friction Across the Pacific


China is on its way to surpassing the U.S. as the world's largest manufacturer far sooner than expected. The question is, does that matter?

In terms of actual size, the answer is, no. But if size is a proxy for relative health of each nation's sector, the answer is yes.

Anyone who walks the aisles of a U.S. retailer might think China already is the world's largest manufacturer. But, in fact, the U.S. retains that distinction by a wide margin. In 2007, the latest year for which data are available, the U.S. accounted for 20% of global manufacturing; China was 12%.

The gap, though, is closing rapidly. According to IHS/Global Insight, an economic-forecasting firm in Lexington, Mass., China will produce more in terms of real value-added by 2015. Using value-added as a measure avoids the problem of double-counting by tallying the value created at each step of an extended production process.

As recently as two years ago, Global Insight's estimate was that China would surpass the U.S. as the world's top manufacturer by 2020. Last year, it pulled the date forward to 2016 or 2017.

"The recent deep recession in U.S. manufacturing does mean that China's catch-up is occurring a few years earlier than would have been the case if there had been no recession," says Nariman Behravesh, the group's chief economist.

U.S. manufacturing is shrinking, shedding jobs and, in the wake of this deep recession, producing and exporting far fewer goods, while China's factories keep expanding. If manufacturers on both sides of the Pacific were thriving, there would be little reason to butt heads. But given the massive trade gap between the two nations and uncertainty in the U.S. over when and to what degree manufacturing will recover, China's ascent has become a point of growing friction.

Chinese manufacturing activity continued to tick up in July from the previous month, data from the China Federation of Logistics and Purchasing showed Saturday. The Purchasing Managers Index edged up to 53.3 in July, from 53.2 in June and 53.1 in May.

A separate CLSA China Purchasing Managers Index rose to a 12-month high of 52.8 in July from 51.8 in June, CLSA Asia-Pacific Markets said Monday. July was the fourth consecutive month the CLSA PMI was above 50 after hovering below the key level for eight months.

Many economists argue that the shrinking of U.S. manufacturing -- both in terms of jobs and share of gross domestic product -- is a normal economic evolution that started long before China emerged as a manufacturing powerhouse. From their point of view, the shrinking would happen regardless and is actually a sign of health that the sector doesn't need to be big to be productive and is shedding low-skill jobs and creating select higher-skill ones.

Global Insight's Mr. Behravesh is one of those who views China's rise as normal, even healthy. "In the natural course, countries go from agriculture to manufacturing to services," he says. "To subsidize manufacturing pushes [the U.S.] backwards down that curve."

But another school of thought -- one known by the somewhat backhanded label of "manufacturing fundamentalists" -- contends the U.S. decline isn't natural and must be reversed to retain America's economic power. From their perspective, that necessitates fighting Chinese policies that fuel low-cost exports, swamping a variety of industries from textiles to tires.

"The notion that we can be a nonmanufacturing society is folly," says Peter Morici, an economist at the University of Maryland. "It's pseudo-science that gives rise to the collapse of civilizations."


Saturday, August 1, 2009

China and Venezuela sign $7.5 bln railway deal

$7.5 Billion dollars used to be a lot of money, but China now is giving out billion dollar loans on weekly basis.

CARACAS, July 30 (Reuters) - Venezuela and China formed a joint venture on Thursday worth $7.5 billion to build a railway that will link farm and oil regions in the South American country, a senior official said.
The China Railways Engineering Corporation (CREC) will hold a 40 percent stake and the Venezuelan state will own the rest, said Infrastructure Minister Diosdado Cabello.
The 468 km (290 miles) of railway are to link grain and cattle production in southwestern Cojedes state with oil fields in eastern Anzoategui state.
"Now the (farmers) will have a railway to help them with their crops," Cabello was quoted as saying in a government statement.
The project will generate 7,500 jobs and is to be completed in 2011, he added, after signing the agreement with Bai Zhong Ren, vice president of CREC.
Venezuela, which depends heavily on trucks to transport cargo domestically, has begun construction of several railway lines to link regional production centers.
The government intends to build thousands of homes for workers who will develop the Orinoco field of extra-heavy oil.
Some investment plans that have been highly publicized by President Hugo Chavez's socialist government are held up by red tape, a shortage of funds or technical difficulties.