Monthly Archives: April 2009

Nanjing’s Not So Secret Espionage Museum

This Bystander loves this story, even though I suspect it falls into the too-good-to-be-true category: A new museum in Nanjing about spying is off-limits to foreigners. “We don’t want such sensitive spy information to be exposed to foreigners, so they are not allowed to enter,” a museum spokeswoman told the Associated Press.

Only Chinese are allowed inside the Jiangsu National Security Education Museum, which documents espionage practices and houses a collection of spy gadgetry going back to the Party’s early days in the 1920s, such as hollowed out coins for hiding documents and guns disguised as lipsticks. And no photography inside the building, either, not even if you have one of those miniature spy cameras that are on display.

All rather quaint in this era of GhostNet and other high-tech cyber espionage. But why have a public museum in the first place if you want to keep it secret?

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China Zhongwang Prices $1 Billion-Plus IPO

Word is that China Zhongwang got $1.3 billion from its initial public offering in Hong Kong. That was less than the $1.6 billion it was looking for, but would still make it the first billion dollar IPO since China South Locomotive & Rolling Stock raised $1.6 billion last August.

The IPO market worldwide has been pretty moribund for all the obvious reasons. China Zhongwang is Asia’s largest maker of extruded aluminum products, which investors see as benefiting from Beijing’s stimulus spending, particularly on new rail lines. Transport-related aluminum products typically have fatter margins than those used in construction. Last year China consumed 39% of the world’s output of extruded aluminum.

The IPO price values the company at just shy of $5 billion, 10 times 2009′s estimated earnings. Trading in the stock is due to start May 8.

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First Cross-Strait M&A Deals Struck

An unsourced report in Taiwan’s Commercial Times (here via Bloomberg) says that some of the first companies on the island to offer to sell stakes in themselves to Chinese companies may include state-owned ones. Chinese companies will be able to take part ownership of Taiwanese companies, and vice versa, from the end of this week as part of the formal improvement of ties between Beijing and Taipei.

The first mainland investment in Taiwan we’ve heard of is China Mobile’s plans to take a $530 million 12% stake in Taiwan’s FarEasTone. The first known deal, however, was in the opposite direction. Taiwanese chip maker United Microelectronics says it will buy China’s He Jian Technology in a $285 million deal that will give it 85% of the company.

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Mexican Swine ‘Flu And Memories Of SARS

It says something about the unpredictable nature of global pandemics that while a couple of years back the next global outbreak was expected to be of avian ‘flu from China, it turns out that Mexican swine ‘flu is what we now all have to deal with. That is not to say that the Asia-Pacific region is immune. There are five suspected cases in Australia and at least 10 in New Zealand, those being schoolchildren returned from a visit to Mexico, a reminder that no disaster is more that a flight away. Airports across Asia are tightening their inspections of incoming passengers, using infrared scanners and other equipment to seek out those will elevated temperatures (Xinhua summary here). China and Indonesia are blocking South Korean pork, though there is no evidence the ‘flu can be transmitted through food. Nonetheless, China, the world’s largest pork consumer, has also banned the import of swine from Mexico and three U.S. states; the Philippines is quarantining imported swine. Everywhere memories of the SARS outbreak — and the economic damage it caused beyond even the human one — are reviving, raising hopes that the experience of that — and particularly of the mistakes made — will make it easier to deal with this latest threat.

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Chery Planning Car Plant In Brazil

A Brazilian newspaper, O Estado de S. Paulo, reports that Chery Automobile is going to start making cars in the country within a couple of years. It says a new plant will have annual production capacity of 150,000 vehicles, which would be sold locally and exported to other Latin American countries and the U.S.

Chery already has a joint venture with Argentina’s SOCMA Group and Oferol of Uruguay that assembles vehicles in Uruguay, but it is capable of producing only 20,000 vehicles a year. The Montevideo plant was opened last year and makes Chery’s Tiggo range of SUVs and QQ compact cars for the Mercosur market, the South American trading bloc that embraces Argentina, Brazil, Paraguay, Uruguay and Venezuela.

It was the Chinese auto industry’s first production plant in South American. The one proposed for Brazil would be s sizable step forward and up.

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China Becomes A Gold Bug

China says it is now the world’s fifth largest holder of gold. Hu Xiaolian, head of the State Administration of Foreign Exchange, told Xinhua that China’s gold reserves stood at 1,054 tonnes at the end of 2008. That is up by 454 tonnes from the last time the country made the size of its gold holdings public five years ago. China, which is the world’s largest gold producer, is now owns more gold than Switzerland and is one of only six countries to hold more than 1,000 tonnes of the metal.

Hu’s announcement is further evidence of Beijing’s diversification of its foreign exchange reserves away from dollar-denominated assets, though to keep things in perspective, the gold holdings are worth $31 billion at current prices, versus foreign exchange reserves of  nearly $2 trillion, and the U.S., the world’s largest holder of gold has 8,134 tonnes, according to the World Gold Council.

The question for investors is whether Beijing plans to buy more and, if so, how much. Intriguingly, the IMF has a 400-tonne holding it has indicated it wants to sell.

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Beijing Suggests China’s Farmers Stay At Home

We noted earlier this year that Chinese farmers were looking to till African and Latin American soil, with a couple of examples of groups of Chinese families farming on those continents and exporting back to China. Now Niu Dun, China’s deputy agriculture minister, is distancing Beijing from such efforts, saying that China wants to depend on its own land to ensure its food security. Perhaps not uncoincidentally Niu’s comments come ahead of a World Bank code of conduct for investing in overseas farmland expected in May, itself ahead of a July UN Food and Agriculture conference on the issue pencilled in for July.

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Great Wall Measured

The Great Wall — the “long wall of 10,000 li” — is not immeasurable, after all. In February, a four-year survey of the wall, planned to be the first detailed mapping, was announced. The first outcome is a finding that the wall is 8,850 kilometers long, not around 5,000 kilometers as had been traditionally thought. That would make it the long wall of 17,700 li on the modern standard for a li, although 10,000 li is not a literal measurement, of course, even if 10,000 li is 5,000 kilometers.

BBC has a map including the newly discovered sections, snapshot of which:

great-wall

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Shanghai Auto Show Takes Centre Stage

This Bystander is looking forward to the Shanghai Auto Show this week. The show was once a minor attraction on the global auto industry’s calendar. Now it has become a star turn, reflecting the Chinese market’s importance to carmakers around the world. Witness the unprecedented number of new model launches and concept cars promised for Shanghai, and not just Porsche’s four-door Panamera, a new S-class sedan from Mercedes and Audi’s new SUV but  Chinese vehicles from the likes of Chery, Great Wall, Brilliance, FAW and SAIC, some destined eventually for the U.S. market, if that ever revives.

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Eight Percent Growth And Damn The Torpedoes

Beijing has set itself a target of 8% GDP growth for the year and by hook or by crook it will get there.

First quarter growth, announced earlier this week, came in at 6.1%, its slowest pace since quarterly GDP numbers were first made public in 1992, down from 10.6% in the same quarter a year earlier and the 6.8% rate in the fourth quarter. But with much of the rest of the world, read the country’s export markets, in recession, as Prime Minister Wen Jiabao said today at an annual gathering of government and business leaders on Hainan, the economy is better than expected.

That is is not worse is down to the 4 trillion yuan stimulus package announced last November and Beijing’s ability to burst through the credit crisis that has paralyzed lending elsewhere by getting its banks to make loans. Bank lending has soared since the fourth quarter, pouring money into state-backed infrastructure projects. Fixed asset investment, which accounted for more than 40% of GDP in 2008, was up 28.8% in the first quarter (vs, 24.6% in the same period a year earlier).

There seems to be plenty of liquidity in the banking system and the risk of bad loans containable. Consumer spending is holding. Industrial production was reported to be up 5.1% in the first quarter–though industrial use of electricity, usually a good proxy for industrial production–fell 8.4% in the quarter according to the China Electricity Council. Assuming both numbers are right, that could point to private investment remaining stalled, though, which would mirror personal consumption. But, all in all, there is enough there to believe that the slowing of growth bottomed in the first quarter. The unknown, given the doubts over domestic private sector demand, is whether recovery is sustainable without growth restarting in the U.S. and European export markets, or whether it will require a second heft dose of government stimulus money to hit that 8% that will be hit.

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