From the struggling economy of US to the emerging economies every one is ready with their investment ideas and strategies. In this series of article we will present a host of economies where inside investments as well as cross border investment will be discussed. In my first issue we are glad to present you investments “In China”.
Foxconn Electronics (Hon Hai Precision Industry) will invest an additional US$349 million in its component manufacturing subsidiaries in China. The investments in China will cover subsidiaries that manufacture products such as tablet PCs, handsets, cables, connectors, handset components, routers and printed circuit boards (PCBs).
Prior to the US$349 million investments, Foxconn also announced investments of US$260 million to its China subsidiaries in October.
China has open up the gates of investments towards medical sector. New policies to encourage private funds, including overseas capital, will be channeled to the medical sector. China wants to increase the quality of its health for the citizens. Investments will flow into reforming government medical facilities.
Disinvestments will executed by the Chinese governments in health sector. The government-backed hospitals will be converted into non-governmental institutions to reduce the ratio of public hospitals. This year China has made some outstanding attraction of investments if we do number crunching.
Investment in central government projects rose 10% year on year to 1.48 trillion yuan, while investment in local government projects was also up 25.9% to reach 17.27 trillion yuan, China’s urban fixed asset investment rose 24.4% in the first 10 months year on year to hit 18.76 trillion yuan (2.83 trillion U.S. dollars).
These figures makes one thing clear that the policies and the various investment opportunities of China are immense and even despite of lending curbs and interest rate hikes funds will never dry up.
We all know that china have already increased investments in gold. Its per-capita savings is being deployed in purchasing gold and converting the paper based currency savings into gold.
Now china has opened up the gates of doing investments in gold via ETF. Lion Fund Management Co has opened up the first ETF of gold in China. According to the firm it plans to raise up to $500 million in China to invest in overseas exchange-traded funds (ETFs) backed by gold bullion. Lion Fund Management has received approval from the China Securities Regulatory Commission and the State Administration of Foreign Exchange. Hence we should be ready to witness more upsurges in price and demand of physical gold and ETF in the 2011.
China is busy in designing plans to invest $1.5 trillion in next five years, in the development of strategic industries. According to reports, China’s State Council is planning to invest 2 trillion Yuan ($300 billion) in the development of strategic industries each year over the next five years. Among these strategic industries we find seven sectors where the flow of capital will find its room in 2011 China.
ALTERNATIVE FUEL CARS
Due to environmental issues and to reduce the carbon emission this model of Fuel is demand. Ethanol is very hard to be produced keeping the food market demand of China. China’s government is keen to ensure supplies of corn and other grains reach the food market, which is already stretched by fast growing demand.
China is bringing a tide of strategic investment in energy savings tools. With total power capacity set to reach 1,430 gigawatt by 2015 from 874 gigawatt at the start of 2010, China has to figure out how to bring trillions of kilowatt hours of power to more than a billion customers, sometimes over very long distances.
China is busy in reducing dependency on foreign oil and also wants to put a tab on cola consumption. This has forced china to open up investment opportunities scouting for energy saving technologies. China have already launched a major drive into hydro power and wind, gas and nuclear. This will supplement the coal sector that provides about 70% of its electricity. The investments in wind gas and nuclear is very low and huge investments is about to pick up in 2011.China is reducing coal consumption in order to meet emission reduction norms.
China plans to build 13,000 km (8,078 miles) of high-speed rail lines by 2012.This will draw huge flow of investments in China in high speed trains. Bombardier Inc., Siemens, Kawasaki Heavy Industries Ltd and Alstom SA are the prime investors in this high speed rail projects.
China is also one of the world’s top miners of lithium, a metal used in batteries, metal alloys, ceramics and nuclear weapons. These materials needs high amount of mining investments. Exploration and mining business is going to pick up new trends and growth in china. China invited foreign investments for gold exploration to the tune of 300 metric tones of gold.
China is also investing heavily in cutting-edge science, from nanotechnology to an array of 35 satellites that will provide a navigation alternative to the U.S. Global Positioning System by 2020. Countries like, Russia, China, and Brazil are emerging on the global map as the next-generation nanotechnology development regions. China is going to be the emerging new investor in nanotechnology.
China is focusing huge on agro-bio technology. To improve crop yields, since demand is rising quickly but supply is constrained by a lack of available water resources and land area new technological initiatives needs to identified and developed. Technology is used to produce more on the same land and agricultural policy to be designed to give more incentive to the farmers to grow more to increase their productivity.
Hence all these strategic investment opportunities will bring growth for the China in 2011.Currently we find that the strategic industries contribution towards the GDP is 2%.Its being planned to make this number climb to 8% of GDP by 2015 and to 15% by 2020. China is now pioneer in gold consumption. China’s growing gold consumption came from all factors, including jewelry sales, private investment, as well as industrial and central bank demand. In 2009, gold consumption in China reached 462 tones in all sectors. And China’s demand for gold has increased an average of 13% annually over the past five years, making China the world’s second largest consumer market for gold after India.
Chinese investments opportunities are going to provide growth for the world economy alike the first nation coming out of recession. China is going to enter a new decade of internal growth of its economy. Its changing its focus from export oriented economy to a domestically driven economy.
We have to be ready to be a part of this investment opportunity.
Indraneel Sen Gupta
Financial, Economic Writer and Research Analyst.