Discussing China's Capital Markets in Steel Town, USA

Last week I travelled to Pittsburgh's Carnegie Mellon University for their "Summit on US-China Relations." Love the town, and had a great time serving a guest speaker along with several other highly qualified investment professionals from major Wall Street banks. 

Sitting up there with some pretty impressive company, we focused on China's growth and maturity in capital markets. This included innovation in the Chinese derivative markets, quantitative strategies in China, the globalization of investors in China's Capital Markets and financing for private Chinese companies. 

I found myself at CMU through more than 15 years as a private sector financier here in America with a focus on China through our firm, New York Global Group ("NYGG"). 
While the talk was pretty free-wheeling, I wanted to point out one top insight: U.S. and China are perhaps some of the most important bilateral relationships in the world. There are significant opportunities to develop between these two countries. New York Global Group celebrates 15 years of office presence in China from 1998 to 2013. 
(www.nyggroup.com ) 

It was an engaging lesson, and I look forward to traveling to Pittsburgh and Carnegie Mellon again for their next summit.

Chinese Smartphone Market Favors Android

Android Platform of Choice in China

The third quarter of 2012 saw the market share for the Android platform operating system for smartphones reach an astounding 90 percent. This number is up from 83 percent during the second quarter, and from 58 percent last year.

These figures are highly significant since the Chinese market for smartphones represents about a fourth of all smartphone sales worldwide. The popularity of Android in China is a key driving force helping Android to continue to widen their lead in their share of the worldwide smartphone platform market.

As Android continues to increase their presence in China, Nokia’s platform, Symbian, has become the largest loser of market share. It is only a matter of time before Symbian completely exits the market as Nokia changes to Windows Phone as their preferred operating system for their smartphones.

Despite their 90 percent market share, Google only offers limited support for Google Play in China. The most common way for users in China to acquire Android apps is through third-party downloads.

Apple, although highly respected by Chinese consumers, has never been able to get a hold in China. Their entrance into the Chinese market for smartphones was weak, offered by only one of the country’s major phone providers. When iPhone 5 makes its entrance into the Chinese market it will be offered by only two providers, not including China’s largest carrier, China Mobile. It is also true that although the Chinese public is enamored with Apple, their iPhones are simply too pricey for the majority of Chinese consumers.

Ben Wey: It Is Up to Us to Light the Way

Ben Wey, President of the New York Global Group, was asked what single quote “is your all-time favorite,” and what about it makes it so important to you?

In response Benjamin Wey had this to say:

“‘We cannot wait for great visions from great people, for they are in short supply. It is up to us to light our own small fires in the darkness.’ – Charles Handy
As an entrepreneur, I face the possibility of failure daily. This quote inspires me to follow my course of conduct in the face of challenges. It inspires me to keep so busy and work so hard that I forget about being afraid.”

In other words, there is no time to be afraid.

Bringing Western Business to China: Advice from Ben Wey: Part 3

Partnering with Chinese Business

There is no question that there is a long list of challenges when bringing a business from the West to China. Ben Wey, president of the New York Global Group understands the challenges, and also knows the return can be worth the investment. Today large corporations have a presence in China because they simply cannot afford not to be in China. Today more and more small and medium sized businesses are also coming to the same conclusion.

As Benjamin Wey puts it, leaders of Western businesses believe that if they do not have a presence in China then they are “not in the largest growth market in the world.”

To be a player in this exciting market companies must spend the time and the capital, and sometimes partner with a local business to help to make the enterprise a success. Wey adds that companies must set aside the usual short-term, quarter-to-quarter thinking and concentrate on being in China for the duration.

There are Western companies who have been in China many years who have achieved their strategic long-term goals. These companies are now being rewarded for their foresight with a piece of China’s fast-expanding consumer market. Looking into the future it seems clear that the importance of this huge market will only increase.

Investing in China: Advice from Benjamin Wey: Part 2

Partnering with a Chinese Company Can Relieve Some of the Burden of doing Business in China

Ben Wey, president of the New York Global Group, advises businesses exploring the possibility of bringing their products to China to proceed cautiously.  Yes, Ben Wey says, there is a great potential for significant rewards when bringing a business to China, but there are risks as well.

One concern is the high cost of bringing a business to foreign soil, no matter where, and China is no exception. The new business will need to fund inventories, create distribution networks, (which will most likely include hiring local employees,) and competing for limited shelf space. The Chinese government can require certain products to adhere to particular rules and regulations which can mean custom manufacturing to meet the specific standards of the government.

Wey advises that companies wishing to do business in China make it easier on themselves by partnering with an already established local firm. It can be an excellent strategy for the Western company to bring in the brand and the technology while the local business provides an existing infrastructure and network for distribution. This “shortcut” can save a lot of worries for the Western company.

Investing in China: Advice from Ben Wey: Part I

Opening Doors to Business in China

New York Global Group president Benjamin Wey explains that businesses venturing into the Chinese market should understand that along with the potential for a large return for Western companies there is a big commitment when doing business in China. According to Wey, “Entering the Chinese market is no easy task.”

Two decades ago it was not that hard for Western-based companies to catch the attention of the Chinese population, explains Wey. Consumers were attracted to brands and technologies coming from the West. In today’s economic climate this fact is simply no longer true. Chinese consumers are much more sophisticated than in the past and the market is filled to the brim with Western products, and at the same time Chinese-made products have developed customer loyalty at home.

When breaking into the market in China Ben Wey has several suggestions:

• Be sure the product is something which is actually needed in China. One example: toasters would be a huge flop in China because the Chinese people “do not like to eat hard things.”
• Take care that the product is acceptable to the Chinese market. If not it is good advice to modify the product and its marketing to suit the Chinese market.
• Investigate the Chinese products which are already available. If there are already products which are popular or have a loyal following, Western companies will most likely need to develop a strategy to successfully compete.

China’s Economy Rebounding in Non-Manufacturing Sector

Chinese Economy Showing Signs of Expansion

The services sector of the Chinese economy is showing signs of improved growth, an indication that the economy as a whole will be expanding.

 The purchasing managers index (PMI) of the non-manufacturing sector rose to 55.5 from 53.7 during the month of September according to the statistics bureau.

October saw China’s first growth in the manufacturing sector in three months, announced the Chinese government.

This data arrives at a time when the Chinese economy reached a three-year low; and also while the once in ten-year change in Chinese leadership is imminent.

Included in the services sector of the Chinese economy includes the construction industry and comprises a solid 43 percent of the overall economy. PMI figures about 50 show an expanding economy, while numbers below 50 are reflective of a shrinking economy.

Government Intervention Boosting Economy

 

Although the rate of growth is the slowest it has been in three years, there was still significant growth during the period from July to September of 7.4 percent. The slowdown is attributed to an easing in demand for Chinese exports from Europe and the US. To compensate for lower foreign demand China has been encouraging domestic demand of its manufactured goods and services by easing monetary policies and increasing spending on infrastructure.

Borrowing Easier

 

As part of its easement of monetary policies China has cut interest rates twice since June, making it more attractive for businesses and other borrowers to acquire funding for projects. The government also reduced three times over the past few months the amount of cash banks are required to hold in reserve, another move designed to increase lending.

Stimulating Projects

 

Infrastructure projects have been approved at an estimated value of over $150 billion, another move to boost the economy.
These actions have seemed to help the Chinese economy overcome some of its doldrums as recent data released by the government indicate growth in several sectors including retail sales and industrial production.

"Overall, we can say that recent government stimulus steps have started to gain some traction," said a senior economist in Beijing.
"This is a positive sign which shows that increased investment is boosting demand for related services."

Chinese Economy on the Rebound Says Kang

Jia Kang, a researcher at the Ministry of Finance in China, predicted that the Chinese economy will most likely experience a come-back during the fourth quarter of 2012. Kang made his statement during a conference at the China Center of Economic Research. The conference is held on a quarterly basis.

Economic Reseracher Jia Kang

According to Kang China will reach the 7.5 percent growth for the year that was the government’s target rate and “the rebound in the fourth quarter is likely to extend into next year.”

This compares favorably with the forecast the Bloomberg news survey estimated; a median appraisal of the opinions of 30 economists which was published on October 24. The survey estimated an expansion of China’s economy by 7.7 percent during the October through December quarter. Third quarter growth was slower than expected; at only 7.4 percent that rate of growth represented the seventh consecutive quarter of economic slowing.

There is additional monthly data which shows definite signs of improved economic performance.

Industrial production in September climbed by more than the estimated 9.2 percent from last year, while retail sales soared by 14.2 percent, the largest increase since March. Fixed-asset investment, not including rural households, also expanded by a generous 20.5 percent during the first nine months of 2012.

“For short-term growth prospects, there will be no big problem,” Jia said. “China’s pro-growth policies will continue to have effect.”

James Baxter of NYGG Named Membership Chairman of the Association of Corporate Counsel

The New York Global Group announced that its chairman, James N. Baxter Esq. was elected to the position of Membership Chairman of the Financial Services Committee for the Association of Corporate Counsel.

JN Baxter to be Membership Chairman of the Financial Services Committee of the Association of Corporate Counsel

The Association of Corporate Counsel is the largest group of in-house counsel, having a membership of over 30,000 individuals situated throughout the world in 75 countries. 

Chairman Baxter remarked: 

"I am glad to participate in the leadership of the financial services committee for the Association of Corporate Counsel. The Committee serves 1,800 members by enhancing corporate governance and member education. I am pleased to serve this group of talented corporate counsel worldwide."

Benjamin Wey, president of NYGG commented on the announcement:

"We congratulate NYGG Chairman James Baxter on his latest accomplishment. NYGG is proud to have such an inspiring executive leading our organization for our continued successes in servicing and investing in our global clients that meet NYGG's client acceptance criteria."

Exporters at Canton Fair in Optimistic Mood

Buyers by the thousands throng to the Canton Fair

The Canton Fair opened on Monday with buyers from all over the world gathering in an optimistic mood, hopeful that the recent stalling of the Chinese economy will soon be gathering momentum and picking up its pace.

The majority of exporters who were there to purchase a variety of goods from electric fans to hammers and wall decorations agreed that the demand from emerging market places and the United States was showing signs of recovery.

“It’s getting better,” said a sales manager of a welding technology company, which sells welding helmets with heavily tinted safety visors, referring to the economy.

The overall optimistic mood at the Canton Fair, which is China’s largest export fair, was clearly visible, especially in comparison to the mood at the previous fair. Almost 60,000 exhibition stalls are on display twice yearly at this key event for exporters. The last fair, held in April, was during a serious economic slowdown for the US and China.

“It seems that while people are searching for signs of China’s consumption taking the lead, it is the good old exports and investment that might lead the recovery again, at least in the short term,” said one Chinese economist.