Page 152 - 2016_WhitePaper_web
P. 152
6 White Paper on the Business Environment in China
China stimulus is usually heavy on fixed assets—just the thing 20 percent this year despite [the 10 percent surge following the
to improve the outlook of machinery manufacturers. stimulus announcement].”11
In October 2012 Sany Heavy Industry’s president Xiang In the words of GK Dragonomics managing director Arthur
Wenbo predicted a “golden age” of development in 2013, while Kroeber, “People had underestimated the impact of the slow-
Caterpillar also predicted increased stimulus spending in China down on certain sectors, particularly construction machinery
over the course of the coming year and both Swiss oil and gas [and that] if you are investing there it has been really painful,
infrastructure supplier ABB and French firm Schneider report- the bottom has fallen out.”11
ed that orders from China for machinery had stabilized in late
2012. Notably, however, Schnieder’s finance chief cautioned Supplementing domestic stimulus as an engine for machin-
that “We do not know when it will come. I’m certainly not ery production and imports, Chinese investment promotion
pointing to clear evidence that the recovery for China is for the authorities are also actively courting foreign investment that
beginning of 2013.”10 carries with it technological capabilities; MOFCOM statistics
indicated that there were 1675 new foreign investment projects
Roughly a week later, the National Development and Re- established over 2009.12
form Commission “announced approvals for projects that an-
alysts estimate total more than 1 trillion yuan ($157 billion), Mergers and Acquisitions are another potential source of
roughly a quarter of the total size of the massive stimulus technology that can be used to cut national reliance on imports
package unleashed in response to the global financial crisis in for critical machinery, and the Central Government is said to
2008.”11 be “pushing forward” such activities, presumably by making the
approval process or other regulatory requirements more stream-
Perhaps significant was the timing of the announcement, lined.13
which was released “just before a deluge of Chinese econom-
ic data due [two days later] that could confirm investors’ worst Machinery manufacturing, and especially heavy- and con-
fears that a downswing in the world’s second-biggest economy struction-related machinery manufacturing, appears to be more
has stretched into a seventh straight quarter” and scant weeks geographically diversified in China than many other industries,
before the official departure of Messrs. Hu and Wen that had with major players in inland provinces, and as far north as Har-
been scheduled for November.11 bin—compared with the east-and-southern-coast-first develop-
ment model that has guided the growth of many other sectors.
According to analysts speaking with Reuters, this likely sig-
nified a more pro-active approach to the economy than had Opposite heavy machinery, consumer electronics also play
previously been taken by Central government authorities in the an important role in China’s economy. Acer CEO Gianfranco
recent past.11 Lanci was quoted by China Daily in December 2010 as pre-
dicting that the mainland market would become the world’s
Whatever the cause, many of the same companies who had largest within three years. The same article cited a projection by
suffered earlier in 2012 appeared to enjoy immediate gains in research firm IDC that the market would grow “21 percent this
stock price, with “Shanghai-listed Sany Heavy Industry, Shen- year from last year’s 54 million units.”14
zhen-listed Zoomlion and Taiyuan Heavy all surged 10 percent.
Japanese construction equipment makers also got a boost, with This growth is not new. Laptop sales alone in China report-
shares of Komatsu Ltd rising 6.6 percent in Tokyo and Hita- edly increased by nearly 35 percent year-on-year in 2008.15 In
chi Construction Machinery Co Ltd up 4.7 percent.” Similarly 2009, as subsidies for PCs under the “Appliances to the Coun-
“Caterpillar Inc, the world’s largest heavy equipment maker, tryside” program became active, rural sales of personal comput-
rose 4.1 percent.”11 ers (both desktop and portable models, presumably) surpassed
792,000 units between January and October16. Domestic man-
Despite optimism riding on the back of the Central govern- ufacturers Lenovo, Haier, Founder and Tsinghua Tongfang to-
ment’s announcement, the sector’s outlook is still somewhat less gether were attributed 97.7 percent of the total sales under the
than bright. subsidy program,17 and according to an article in China Daily an
increase in the maximum price for a product to be accepted into
According to Reuters, “Foreign and local machinery makers the program from 3,500 to 4,000 would further increase sales
in China, the world’s largest construction market, are struggling by giving the more affluent farmers opportunities to purchase
as the slowdown saps investment growth to 10-year lows. Fall- higher-end models while still benefitting from the subsidy.16
ing profits have spurred firms to cut production or seek new
clients.”11 Business-oriented technology companies such as Cisco, Ju-
niper and IBM continue to face challenges in China:
As a result, Caterpillar began to export Chinese-made ma-
chinery to the Middle East and Africa, Hitachi “slashed pro- Beijing has long mistrusted foreign technology compa-
duction at its excavator-making plant in eastern China” and
“Shares in China heavyweight Sany Heavy Industry, whose sec- nies, and those concerns have been exacerbated since
ond-quarter profit skidded 28 percent, are still down more than
[whistleblower Edward] Snowden first revealed the ex-
152
China stimulus is usually heavy on fixed assets—just the thing 20 percent this year despite [the 10 percent surge following the
to improve the outlook of machinery manufacturers. stimulus announcement].”11
In October 2012 Sany Heavy Industry’s president Xiang In the words of GK Dragonomics managing director Arthur
Wenbo predicted a “golden age” of development in 2013, while Kroeber, “People had underestimated the impact of the slow-
Caterpillar also predicted increased stimulus spending in China down on certain sectors, particularly construction machinery
over the course of the coming year and both Swiss oil and gas [and that] if you are investing there it has been really painful,
infrastructure supplier ABB and French firm Schneider report- the bottom has fallen out.”11
ed that orders from China for machinery had stabilized in late
2012. Notably, however, Schnieder’s finance chief cautioned Supplementing domestic stimulus as an engine for machin-
that “We do not know when it will come. I’m certainly not ery production and imports, Chinese investment promotion
pointing to clear evidence that the recovery for China is for the authorities are also actively courting foreign investment that
beginning of 2013.”10 carries with it technological capabilities; MOFCOM statistics
indicated that there were 1675 new foreign investment projects
Roughly a week later, the National Development and Re- established over 2009.12
form Commission “announced approvals for projects that an-
alysts estimate total more than 1 trillion yuan ($157 billion), Mergers and Acquisitions are another potential source of
roughly a quarter of the total size of the massive stimulus technology that can be used to cut national reliance on imports
package unleashed in response to the global financial crisis in for critical machinery, and the Central Government is said to
2008.”11 be “pushing forward” such activities, presumably by making the
approval process or other regulatory requirements more stream-
Perhaps significant was the timing of the announcement, lined.13
which was released “just before a deluge of Chinese econom-
ic data due [two days later] that could confirm investors’ worst Machinery manufacturing, and especially heavy- and con-
fears that a downswing in the world’s second-biggest economy struction-related machinery manufacturing, appears to be more
has stretched into a seventh straight quarter” and scant weeks geographically diversified in China than many other industries,
before the official departure of Messrs. Hu and Wen that had with major players in inland provinces, and as far north as Har-
been scheduled for November.11 bin—compared with the east-and-southern-coast-first develop-
ment model that has guided the growth of many other sectors.
According to analysts speaking with Reuters, this likely sig-
nified a more pro-active approach to the economy than had Opposite heavy machinery, consumer electronics also play
previously been taken by Central government authorities in the an important role in China’s economy. Acer CEO Gianfranco
recent past.11 Lanci was quoted by China Daily in December 2010 as pre-
dicting that the mainland market would become the world’s
Whatever the cause, many of the same companies who had largest within three years. The same article cited a projection by
suffered earlier in 2012 appeared to enjoy immediate gains in research firm IDC that the market would grow “21 percent this
stock price, with “Shanghai-listed Sany Heavy Industry, Shen- year from last year’s 54 million units.”14
zhen-listed Zoomlion and Taiyuan Heavy all surged 10 percent.
Japanese construction equipment makers also got a boost, with This growth is not new. Laptop sales alone in China report-
shares of Komatsu Ltd rising 6.6 percent in Tokyo and Hita- edly increased by nearly 35 percent year-on-year in 2008.15 In
chi Construction Machinery Co Ltd up 4.7 percent.” Similarly 2009, as subsidies for PCs under the “Appliances to the Coun-
“Caterpillar Inc, the world’s largest heavy equipment maker, tryside” program became active, rural sales of personal comput-
rose 4.1 percent.”11 ers (both desktop and portable models, presumably) surpassed
792,000 units between January and October16. Domestic man-
Despite optimism riding on the back of the Central govern- ufacturers Lenovo, Haier, Founder and Tsinghua Tongfang to-
ment’s announcement, the sector’s outlook is still somewhat less gether were attributed 97.7 percent of the total sales under the
than bright. subsidy program,17 and according to an article in China Daily an
increase in the maximum price for a product to be accepted into
According to Reuters, “Foreign and local machinery makers the program from 3,500 to 4,000 would further increase sales
in China, the world’s largest construction market, are struggling by giving the more affluent farmers opportunities to purchase
as the slowdown saps investment growth to 10-year lows. Fall- higher-end models while still benefitting from the subsidy.16
ing profits have spurred firms to cut production or seek new
clients.”11 Business-oriented technology companies such as Cisco, Ju-
niper and IBM continue to face challenges in China:
As a result, Caterpillar began to export Chinese-made ma-
chinery to the Middle East and Africa, Hitachi “slashed pro- Beijing has long mistrusted foreign technology compa-
duction at its excavator-making plant in eastern China” and
“Shares in China heavyweight Sany Heavy Industry, whose sec- nies, and those concerns have been exacerbated since
ond-quarter profit skidded 28 percent, are still down more than
[whistleblower Edward] Snowden first revealed the ex-
152
