Economy & Trade
As it appears foreign businesses invested in China are going to be looking forward to a difficult twelve months ahead in 2016, it is prudent to recall that this is not the first time difficulties have arisen in China. The Asian Financial Crisis, SARS, and spats over Taiwan have all wreaked damage over the past twenty years. Yet what is different this time is that the doom and gloom scenario is economic based, and in part a reflection of the actual state of China’s own economy and market potential.
Talks of a complete crash, I feel, are wide of the mark; China will experience problems next year, and we have already seen IMF warnings of corporate bankruptcies. However, the news that China may let some of its SOEs go to the wall is not essentially new. Over the past two decades, China has let a State-backed investment fund go bankrupt, in the form of the unfortunate GITIC back in 1998, and more recently with Chinese property developer Kaisa. There have been many other cases. Bankruptcies in China are a part of normal business life just as they are in the West.
By Steven Elsinga
As the RMB continues its steady march towards further internationalization, more and more foreign companies have begun using the Chinese currency. In early 2015, the RMB became the world’s fifth most traded currency and now even ranks second in the use of documentary credit.
This means that, for foreign-invested companies in China, RMB currency risk will be an issue of growing consideration. A company faces currency risk when it transacts in more than one currency. A change in the exchange rate can cause costs to rise significantly, or margins to evaporate.
For example, if a company selling to Chinese consumers in RMB has a loan in American dollars, it will be harder to repay that loan when the dollar rises in value. Likewise, an export company that sources materials for production in China will see its costs go up if the RMB appreciates.
Unlike the other top five currencies, the RMB is not freely convertible, but subject to foreign exchange controls. Despite that, recent years have seen increased volatility in the RMB, as evidenced with the sudden devaluation of the RMB by the Chinese central bank in August 2015.
By Jake Liddle
On September 21, a dialogue took place between the UK’s Chancellor of the Exchequer George Osborne and China’s Vice-Premier Ma Kai, concluding in a positive agreement to continue strengthening bilateral relations. Ahead of President Xi Jinping’s planned state visit to the UK later this year – which will be the first state visit of a Chinese president in ten years – Osborne’s visit to China was an effort to encourage the two countries’ strong diplomatic ties, with the Chancellor saying he would like the UK to be “China’s best partner in the West”.
The UK and China have enjoyed a cooperative and friendly relationship which has seen significant increases in trade and business over the years. According to the HM Treasury’s overview of the dialogue, in 2014, China was the UK’s sixth largest goods export market, up from 14th in 2003, and in 2013, the UK attracted close to US$12 billion of Chinese foreign direct investment.
Though the third smallest state in the U.S., Connecticut has the country’s highest per capita income. Connecticut’s GDP came to nearly US$253 billion in 2014, and derives most of its wealth from the finance and insurance sectors.
Imports, exports and major industries
Manufacturing is Connecticut’s largest industry after finance and insurance. Electronics and computers also feature heavily in the state’s exports, making it a popular producer for China’s technology driven market. In 2014, China was Connecticut’s firth largest export market, with exports totaling US$880 million. The top exports are as follows:
Our Latest Round-Up of Business News Affecting China-Based Businesses Investing in Asia
In this edition of China Outbound, we take a closer look at the economic initiatives and programs introduced by ASEAN nations and India. We begin by introducing India’s major economic projects “Make in India” and “Digital India,” which serve as a magnet for foreign investment in India. And then discuss the policy package implemented in Indonesia and the Philippines, aiming at boosting free trade. Finally, we talk about the strengthened economic ties between India and Vietnam during new period of bilateral cooperation.
By Dezan Shira & Associates
Editor: Felicia Romain
On September 22, Chinese foreign minister Wang Yi and Prime Minister Li Keqiang met with Iranian foreign minister Javad Zarif in Beijing. The meeting aimed to further bilateral ties between Iran and China. During the visit, both Iran and China predicted a successful future for Iran-China relations, especially with the current nuclear deal – the Joint Comprehensive Plan of Action (JCPOA) – underway.
Through the years, China and Iran have continued to foster an extensive diplomatic relationship. Today, China is the biggest customer of Iranian oil and the first in line for Iranian overseas business. Thus, with the progression of the Joint Comprehensive Plan of Action, strengthening bilateral ties between Iran and China looks inevitable.
By Ruairidh McPherson
With a GDP of around US$644, the State of Pennsylvania is ranked as the United States’ sixth largest state economy. If Pennsylvania were an independent country, it would be included in the top 20 largest economies in the world. The state’s strong economy is also highly diversified, with no single industry accounting for more than 5 percent of businesses.
International trade is particularly important in the state, with export and import industries supporting over 1.6 million Pennsylvanian jobs. World Trade Pennsylvania is a highly successful state programme aimed at promoting exports, and has helped position Pennsylvania as a state built on success in international business.
With the seventh highest GDP in the nation, the state of Ohio is a significant player within the United State’s agricultural, manufacturing, and service sectors. Ohio’s GDP totaled US%583.4 billion in 2014, an increase of over US$130 billion in the past decade. The state’s primary industries include finance, insurance, and real estate, which together account for nearly 20 percent of Ohio’s GDP. Product manufacturing of non-durable goods serve as the state’s second largest contributor to its GDP, accounting for 0.44 percent of its growth in 2014. Continue reading…