News in Brief

By: Minter Ellison

Provided by World Services Group


News in Brief

   Published April 14, 2005 - Australia

2005 to be another record year
Record foreign investment of US$60.6 billion was injected into China in 2004. Foreign direct investment continues to rise, as already seen in January 2005 when it rose 10.7 per cent on an annual basis (amounting to total investment of US$4.1 billion). This increase was partly attributed to the expansion of large companies such as Wal-Mart and Coca-Cola, to meet the demand of the world's fastest growing major economy. In addition, the Government gave permission to more than 3,500 foreign companies to build stores and factories in January 2005. Also during January, contracted foreign investment, or investment pledged but not yet delivered, surged 27.7 per cent to US$12.8 billion.

Retail developments attract international giants
The property giant of South East Asia, Singapore's CapitaLand, has eyes on China's thriving retail property development opportunities. The company has entered into an agreement with Shenzhen International Trust & Investment Co Ltd (SZITIC) to form joint ventures to acquire and manage a number of retail malls in China. In the proposal, CapitaLand takes a 51 per cent stake, requiring an investment of nearly US$120 million.

Both sides expect the malls to generate a property yield of over 9 per cent. The companies also intend to develop a further 14 retail malls within a year, needing an investment of US$512 million.

It is important to note that SZITIC currently owns a 35 per cent share in Wal-Mart operations in China. Wal-Mart, the American retail giant, currently operates 38 stores in China and is aiming to open a further 20 to 30 super centres in the coming four years.

Hollywood goes Chinese
According to sources from the China Changchun Film Festival, which was held on 11 and 12 January this year, more private and foreign investment will go to China's film industry in 2005. The film authority stated that this year the industry will see film production cooperation with Russia and Austria, as well as the People's Republic of Korea.

In 2004, sizable private and foreign capital was injected into the Chinese film industry, which had been slow in its development up until then due to a shortage of funds. About 80 per cent of last year's total movie products were funded by private and foreign investors. In addition to movie production, the funds were also used to construct cinemas in major cities including Beijing, Shanghai and Guangzhou.

Amway makes inroads
Direct selling giant Amway has experienced particularly good performance in China so far. By April this year, the company will increase its production capacity in China to US$3 billion from US$1.93 billion.

The decision to expand was based on extraordinary sales revenue. Amway (China) Chairperson, Audie Wong, has been reported as estimating that sales growth for last year was as high as 50 per cent, with sales this year expected to be just as strong. In addition to increased production capacity, Amway is opening 50 to 60 new stores, adding to its existing 140. Substantial investment will also be made in advertising and brand building this year, to further raise the profile of a number of its best selling products.

USB in major fund management venture
Swiss-based bank UBS will form a joint venture fund management in China by acquiring a 49 per cent stake in Shenzhen-based China Dragon Fund Management Co Ltd. According to the agreement, China Dragon will be reconstructed as a joint venture between the Hongtai Trust & Investment Co Ltd, a wholly owned subsidiary of the State Development Investment Corporation, and UBS.

According to Lord Brittan, Vice Chairman of UBS Investment Bank, the proposed joint venture represents an important step in UBS' broader China strategy. It has been agreed that UBS will work with China Dragon's management to apply UBS' international experience in investment research, portfolio management, risk management and other areas of expertise. UBS Global Asset Management believe that China is a key strategic market for all of UBS, and the proposed joint venture is a vital step in creating a major presence in China's asset management industry.

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