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News from China
Chinese companies expanding in Thailand
18th May 2016

 VERYWHERE you look on Thailand’s Amata industrial estate in Rayong you see signs in Chinese. It’s a similar story just along the coast in the tourist resort of Pattaya, where Mandarin is increasingly visible alongside English and Russian.

 
As China’s economy slows, its investors are looking abroad for growth and Thailand, home to one of the world’s largest ethnic Chinese minorities and a gateway to Southeast Asia’s 600 million consumers, is a hot investment destination in everything from industry to condos.
 
“Thailand is the first stop for Chinese tourists and investors,” said Xu Gen Luo, who runs the Thai-Chinese Rayong Industrial Zone, 200 kilometers southeast of Bangkok. Dozens of Chinese-owned solar, rubber and manufacturing plants have opened there since 2012.
 
“Thailand’s investment environment, especially its investment promotion policies, are among the best worldwide,” he said, adding that labor costs are higher in China.
 
Since a May 2014 coup, Thailand and China have drawn closer diplomatically and militarily as the ruling generals seek to counterbalance the country’s cooling ties with Washington.
 
Chinese investors have found a warm welcome in an economy that has seen investment crimped by a decade of political turmoil, and where the junta has struggled to revive exports and domestic demand in the two years since seizing power.
 
Investment pledges from China jumped fivefold in the first quarter to 5.7 billion baht (US$163 million) from just 1.1 billion baht a year earlier, giving China the third-largest investment slate during the period as Chinese firms raced to meet a tax break deadline and US investors held back.
 
That was still some way behind Japan, which pledged 15.6 billion baht. Japan has long been Thailand’s largest investor, with several large car plants accounting for much of the money.
 
Chinese investment is growing strongly, however, partly due to Beijing’s policy of encouraging manufacturers to shift production abroad to deal with industrial overcapacity at home.
 
“What we’ve seen so far in Chinese investment into Thailand is small compared to what’s coming,” said Joe Horn-Phathanothai, chief executive of Strategy613, a strategic adviser focused on Chinese and Thai corporate investments.
 
“Hand-in-hand with the slowdown in China we’ll see an increase in the number of deals the Chinese do abroad.”
 
Movie draws crowds
 
Last year, China was the fourth-biggest foreign investor in Thailand, behind Japan, the United States and Singapore.
 
Tourist numbers have also jumped, helped by the success in China of the 2012 comedy “Lost in Thailand.”
 
About 7.9 million Chinese visited the “Land of Smiles” last year, up 71 percent from 2014, when unrest in Bangkok that preceded the coup scared tourists away, and Thailand expects more this year.
 
There has been no slowdown in the number of tourists due to the economic deceleration in China, helped by the growth of budget airlines.
 
Thailand is expecting a record 33 million tourists this year, with China providing the bulk of the increase from the record set last year of just below 30 million.
 
Xu expects the number of Chinese firms at his park — jointly developed by China’s Holley Group and Thai industrial estate developer Amata Corp — to increase to about 100 this year, from 75 currently, and to 500 in the next five years.
 
In March, China’s Trina Solar, the world’s No. 1 solar panel maker, opened a manufacturing facility there.
 
Moving to Thailand can also help companies in industries such as solar and chemicals sidestep anti-dumping measures, industry experts said.
 
“China is facing trade barriers from many countries, particularly on solar, so many Chinese firms are coming to invest in Thailand,” said Visnu Limwibul, chairman of a Thai electronics and telecommunications industry group.
 
State-owned Gang Yan Diamond Tools (Thailand), which makes precision manufacturing blades, followed Beijing’s Belt and Road initiative to rebuild ancient Silk Road trade links with Asia and Europe and set up in Thailand in 2014.
 
“When we first came, we were concerned about the political situation and social instability. We are still concerned now,” said Chairman Zhao Gang.
 
China and Thailand are discussing cooperation on the Thai section of a rail project under the Belt and Road plan that would eventually connect Kunming in southwest China with Singapore, but have to date failed to agree on terms.
 
Real estate investment is also on the rise.
 
Bundit Sirithunyhong runs the Suttangrak Group, which has joined with Chinese firms to develop projects worth 5 billion baht to sell as time-shares to Chinese buyers.
 
“They’re not just investing in real estate, but starting to use Thailand as a base for business in Southeast Asia,” he said.
 
“Here they can stay and work ... It’s a step further in business expansion.”
Source: Shanghai Daily, May 18, 2016
April indicators damage hopes of China’s economic recovery
16th May 2016

 THE rates of growth of China’s industrial output, retail sales and fixed-asset investment all slowed in April, the National Bureau of Statistics said, dimming hopes raised by the March data and adding to signs of a still murky economic outlook.

Factory output rose 6 percent year-on-year in April, down from 6.8 percent in March and below market expectations of about 6.5 percent according to a Reuters poll.

Industrial production accounted for 40.5 percent of China’s GDP in 2015, making it one of the leading indicators of economic growth.

The bureau attributed the slower growth to weak foreign demand, declining production of high energy-consumption industries, and a correction from seasonal factors in March.

But growth of high-tech manufacturing output and consumer-oriented products accelerated, said NBS researcher Jiang Yuan.

Retail sales grew 10.1 percent year on year in April, slowing from 10.5 percent in March. Similarly, fixed-asset investment growth eased to 10.5 percent in the January-April period, missing market estimates of 10.9 percent and down from the first quarter’s 10.7 percent.

The NBS attributed the slower retail sales to weakness in the new car market, and the easier investment in manufacturing and infrastructure under pressure of overcapacity and weak demand.

The data were in line with an array of economic indicators pointing to ongoing but fragile growth momentum.

Consumer inflation remained at 2.3 percent for the third consecutive month in April, but factory prices fell for the 50th consecutive month.

Exports in yuan-denominated terms rose 4.1 percent year on year, slower than the 18 percent increase in March, while the Purchasing Managers’ Index fell 0.1 points month on month to 50.1.

Monthly new yuan loans also dropped almost 60 percent month on month to 555.6 billion yuan (US$85.2 billion) in April.

“The April data mark a return to the normal,” said Zhou Hao, an economist with Commerzbank.

“The economic situation is still under control of policy-makers, and the negative reading is just a correction to the over-positive sentiment in March,” he said.

Speculation about whether the government will rein in its stimulus measures rose after the People’s Daily published an interview with an “authoritative source” last week, saying the slow economic growth will last for years and warning that too much reliance on debt to boost the economy could lead to a financial crisis or recession.

Source: Shanghai Daily, May 16, 2016
Chinese car sales gain at slow pace
12th May 2016

 CHINA’S auto sales growth slowed in April, and customers may again benefit from another round of price war by dealers to drive sales.

 
Total deliveries of passenger cars and commercial vehicles grew 6.3 percent last month to 2.12 million units, slower than the 8.8 percent year-on-year increase in March. The passenger car market, making the bulk of the sales, rose 6.5 percent in April versus 9.8 percent in March, the China Association of Automobile Manufacturers said yesterday.
 
The slowdown in the sales growth showed signs of depressing demand, Zou Tianlong, UBS Securities analyst, said in a note yesterday.
 
Chinese auto sales growth peaked at 45 percent in 2009 and has fallen steadily as cities try to control smog and congestion with limits on new vehicles.
 
Automakers sold 24.6 million vehicles in China in 2015, up 4.7 percent. It was the smallest increase in three years, following gains of 6.9 percent and 13.9 percent in 2014 and 2013 respectively.
 
In October, China sought to boost the market by slashing the purchase tax on passenger cars with small engines.
 
Sales of passenger cars with engines smaller than 1.6 liters rose 12.1 percent in April from a year earlier to 1.28 million units, CAAM said in a statement.
 
The rough patch that China’s auto market went through last year starting from spring, which saw tepid demand followed by heavy price discounts, might be looming again.
 
“Our latest research shows that carmakers are all set to cut prices to fight for market share once they find the demand decreasing,” said Zou.
 
“We think over the next quarter or two, the industry will face the risk of another round of price reductions.”
 
Some foreign automakers outperformed the overall market.
 
General Motors said it sold 277,979 vehicles in April, up 7.5 percent year on year.
 
But another US automaker Ford said its sales fell 11 percent to 82,324 units last month, according to a statement.
Source: Shanghai Daily, May 12, 2016
Worries dent Chinese commodities
11th May 2016

 CHINESE commodities dived yesterday, led by 6 percent falls in steel and iron ore futures, as deepening worries about China’s demand extended a fortnight of sharp drops and false rebounds in the country’s market for industrial metals.

Speculative funds rushed into China’s commodities futures last month, betting the country’s economy was bottoming. The buying frenzy alarmed domestic exchanges and regulators feared a bubble could be forming as volumes and prices soared.

To limit speculation on futures from steel to coal, the country’s three commodity exchanges have taken steps, including raising trading margins and transaction fees, and widening daily movement caps.

The big market swings and the response of authorities have raised concerns about the risk of contagion for global markets, particularly after last year’s stock boom and bust.

Yesterday, the Dalian Commodity Exchange said it would continue to strengthen its market monitoring and may raise transaction fees further to curb speculation.

“Futures liquidity has dropped sharply following exchanges’ measures, and now investors are worried China’s economic trend will be weaker than previously expected, hurting sentiment,” said Zhao Chaoyue, an analyst at Merchant Futures in Shenzhen.

The most-traded rebar, or reinforced steel, on the Shanghai Futures Exchange saw its biggest daily fall on record yesterday. It hit a downside limit of 6 percent to 2,175 yuan (US$334) a ton, the lowest since April 7.

September iron ore futures on the Dalian Commodity Exchange also tumbled by their daily permissible limit of 6 percent to 388 yuan a ton.

Spot prices of billet, a semi-finished steel product, seen as a key reference point for the physical market, have fallen in the last few days, traders said.

The declines followed customs data on Sunday that showed iron ore imports fell 2.2 percent in April from March, while copper ore and concentrate imports shed 8 percent on the month.

High iron ore stocks

Fanning concerns about weak fundamentals, iron ore inventories at China’s big ports topped 100 million tons by the end of April, the China Iron & Steel Association said yesterday.

“Steel demand is seasonally weaker between June and August, while output keeps rising, which has been interpreted by investors as the turning point of the economic recovery,” said Zhao of Merchant Futures.

Speculative interest has focused on steel since it is seen as a lead indicator for the commodities complex, which is used at the very early stage of projects.

“In the next two to three months we might see some seasonal factors kicking in to cool prices down and drive speculative buyers away,” said Judy Zhu, an analyst with Standard Chartered in Shanghai, adding that demand should gradually improve over six to eight months.

Other steelmaking raw material futures also fell yesterday, with metallurgical coke slumping 6.9 percent and coking coal down 4.3 percent. Nickel dropped 3.3 percent.

The selling also hit agricultural futures.

China’s Dalian soybeans slid for a fourth straight session yesterday to their lowest in nearly three weeks even as strong demand from the world’s top importer of the commodity drove up benchmark US prices.

Source: Shanghai Daily, May 10, 2016

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