Category Archives: Investment

Guangzhou rated for industrial upgrading

Guangzhou has been recognized by the central government for its efforts to upgrade the city’s industrial structure in 2019, ranking among the top 10 nationwide. The city recorded 103.8 billion yuan of industrial investment last year, up 9.1% YoY. Of this, more than a third (35.42%) was spent on “technological transformation”: 36.8 billion yuan, which shot up 43% from the previous year. 

The investment has clearly had an effect on growth. This is especially in high-tech manufacturing, which saw output jump 21% over the year. It now accounts for more than half (57.2%) of total industrial output in the city. Strategic emerging industries are the ones to watch, though, as smartphones soared by 170%, industrial instruments by 147.5%, and new energy vehicles by 114.7%.

Continue reading Guangzhou rated for industrial upgrading

Huizhou plans new 100b yuan cluster

Huizhou is building a new industrial park in its Huiyang district that will be generating 100 billion yuan in output within the next 5-8 years, local media reported the city’s government as saying. Clustered on the district’s Sanhe street, it will actually be a collection of buildings and production facilities: Huiyang Xiangling Intelligent Science and Technology Industrial Area, Huaxia-Shunze Information Industry Cluster Area, and Wandong Wisdom Valley Industrial Area.

Continue reading Huizhou plans new 100b yuan cluster

Shenzhen to keep investing, while ‘considering private participation’

Shenzhen will see fixed-asset investment continue to grow strongly in 2020, the city government says, with projects under way budgeted to cost around 177 billion yuan, 23% more than 2019. 

Infrastructure will be a big part of this, including 12 rail transit projects under construction. Others include the redevelopment of Binhai Avenue in Nanshan, where the futuristic Shenzhen Bay Headquarters Base is being built, and the establishment of a National Science Center in the Guangming “Science City” district. 

Continue reading Shenzhen to keep investing, while ‘considering private participation’

New Foreign Investment Law takes hold

Now that 2020 is 15 days old, and the US and China have a deal (sort of) on trade, it might be time to shake off the New Year’s hangover and knuckle down to understanding the opportunities available to investors in the world’s 11th-largest economy.

A good way to start would be to read the Foreign Investment Law, which went into effect on January 1. It brings in some major changes in how foreign investors are treated, offering increased protections. For new investors, it makes it a lot easier to incorporate and navigate the bureaucratic minefields, although it is still important to understand the different company structures available to foreigners, which can vary depending on the industry. It also opens new sectors of the economy to foreign investment and, particularly, opens the Belt and Road Initiative to foreign capital.

Continue reading New Foreign Investment Law takes hold

Guangdong to boost spending in 2020

The coming year will likely be a time of fiscal prudence for Guangdong, as the provincial government has decided to rein in growth of public spending in 2020: expenditures will grow by the same rate as what is projected for revenues, around 4%. This is down sharply from last year’s 10% spending growth, while revenues are projected to fall only slightly from last year’s 4.5% growth.

Such restraint will result in public spending of 1.8 trillion yuan, around 500 billion yuan more than projected revenues, which is nothing to sneeze at. This being China, by far the single biggest line item, of 221.17 billion yuan, will be spent on the all-encompassing masterplan of “One Core, One Belt and One Zone” for the region’s development, i.e., no elaboration is necessary. However, looking more closely, certain sectors are still being prioritized and will be allowed to eat at the public trough more voraciously this year. 

Continue reading Guangdong to boost spending in 2020

Dongguan aims to attract HK services

Hong Kong companies have been the mainstay of Dongguan’s development in the Reform and Opening era, but mostly in manufacturing. Dongguan wants to upgrade the relationship to one that is focused on services, and it has begun construction of a new “Hong Kong Center” to achieve that.

Pushing this is the Dongguan Foreign Enterprise Association, which will work with the city government to develop the center, located in its main central business district. It will cost 4 billion yuan and cover an area of 145,000 sqm, with three commercial buildings. 

It’s not like Hong Kong services companies don’t know where Dongguan is, of course. In 2018, Dongguan received 3,308 delegations representing Hong Kong enterprises, while it sent 254 delegations to Hong Kong. These covered trade, education, accounting, finance, medical, environmental protection, and legal services, among other. 

Read more (in Chinese)

GBA firms have potential, need finance – He Xiaojun speech

Edited transcript of a speech by He Xiaojun, Party Secretary and Director of the Guangdong Provincial Local Financial Supervision Administration:

The central government has launched two major initiatives in the region this year, for which we should all be grateful. They are the Greater Bay Area, and the designation of Shenzhen as a Pioneering Zone for Socialism with Chinese Characteristics. With these, we have the means and the framework to conduct significant reforms, especially of the financial sector.

First, let me share some data points. Looking back on international patent applications for the most recent year available, 2017, we see that the three other “bay areas” of Tokyo, New York and San Francisco registered 22,000, 12,000 and 35,000 patents, respectively. Our Greater Bay Area registered more than 176,000, almost eight times that of Tokyo, 16 times that of New York, and about five times that of San Francisco.

However, this is nothing to celebrate. Most of our patents are in the consumer electronics industry and advanced manufacturing. We must be soberly aware that we remain stuck at the lower end of the industrial manufacturing value-added chain. Basic research is where we are lacking.

This can be improved, but it is going to require a more thoughtful approach to how we use financial resources. Policy-based finance and medium- and long-term credit insurance funds, for instance, can help. These can support the construction of national key laboratories and high-level universities. However, this will take a long time.

What is required mostly is a shift in mindset. I went to Dongguan for research some time ago, where I saw a professor who had just come back from the United States and was doing basic research on robotics development in the Songshan Lake district. He lamented the drive to constantly transform scientific research into commercial success. If your only indicator of the success of research is how much money it can generate, the quality will never be good enough.

Clearly, we are still excessively demanding that our scholars develop their research in the direction of industrialization. We have too many short-term and fast-action requirements. We must start to pay more attention to the next step of long-term funding to conduct major breakthroughs in basic research.

The good news is that we have an incredibly strong foundation on which to build a better model for financing industrial growth. Take supply chain finance. There will always be a need for finance to support the continuous optimization of manufacturing and industrial chains. In this regard, we have an unrivalled supply chain, which just needs a better financing mechanism.

There are currently 500 of what I like to call “professional towns” in Guangdong. The combined GDP of these towns accounts for three average Chinese provinces. Of these, 146 each generate output of more than RMB 10 billion per year. A dozen are above the RMB 100 billion level. Those in Dongguan, Foshan and Zhongshan are particularly eye-catching. Xiaolan Town of Zhongshan produces 70% of the world’s lock cylinders. Guangzhou’s Xintang Town produces 60-70% of the world’s denim. But these towns have not been having an easy time rising up the value-added chain, because of access to finance. This is vital to take the next step of Guangdong’s industrial transformation.

Most of these enterprises are small and medium-sized. This is why we have started to build a financing platform for SMEs in Guangdong, since July 17. It makes good use of big data and blockchain technology to build up trustworthy credit profiles for these companies. It is working already, with a good case study being the conglomerate TCL (based in Huizhou). All of TCL’s SME suppliers can now get unsecured loans, which will help them to rebuild and restructure the industrial chain, and further improve the quality of the industry. We are leading the country in this effort.

At the same time, we are also building a platform for the registration and protection of intellectual property. Everyone knows that SMEs have many talents, but they are all light on assets. What they have in abundance is intellectual property rights. Therefore we are raising their capacity to access credit by placing a higher value on that IP.

We are also determined to create the right multi-level financing platform to support the cultivation of “star” enterprises. We need to be more like Japan and South Korea, which have clear plans to cultivate at least 100 companies with global clout. This doesn’t always mean they must be large. They have found that they can have technological leadership in the cross-border trade chain at the SME level. Such stars will be grown into the multinational behemoths of the future.

Guangdong is also preparing such a plan to cultivate star enterprises that can grow into major multinational enterprises.

We have some already: companies with enormous potential that can become global giants with the right access to funding. Take Shenzhen Guangfeng Technology, which recently listed on the Shanghai STAR market, as an example. It makes 150-inch, high-tech laser-projected TVs, which sell for RMB 1.5 million each. Before its recent listing, Guangfeng was valued at between RMB 1 billion and RMB 2 billion. Although its stock price has experienced twists and turns after the listing, it has recently stayed at a market cap of around RMB 15 billion.

Transsion Technology is another. This Shenzhen-based company entered the African market in only 2012, selling cheaper mobile phones. It now has almost half of the entire African market and is currently valued around RMB 38 billion.

We need to bring more of such enterprises to our capital market and cultivate our own stars.

Look at it this way. There are now 600 listed companies in Guangdong, but we have 45,000 state-level high-tech enterprises based here – which means only 1.8% are listed. Under the guidance of the CSRC, Guangdong will address this. We will dig out more star enterprises and encourage them to raise public equity.

Macau could play a valuable role in this endeavour. When I was in Shenzhen, we helped the Macau SAR government draft a plan for the Macau Stock Exchange. I hope that it will become the Nasdaq equivalent for the offshore Renminbi. The plan has been sent to the central government, and I hope that it will be approved before the 20th Anniversary ceremonies are held (on December 20).

We can also use “green finance” to help our technological innovation efforts become more competitive at the international level. In Guangzhou, we have established a national-level “green financial experimental zone”. Guangdong’s carbon emissions trading already accounts for 70% of the national total this year. This is why it makes sense to establish the Guangzhou Futures Exchange. It should be approved before the end of this year.

These things will make Guangdong and the entire Greater Bay Area’s financial innovation initiatives speed up.

Looking at the demand side of the equation, it is clear that we need to catch up. The Greater Bay Area has a population of 77 million, with per-capita GDP exceeding US$20,000. That is a developed-country level, with high potential for a takeoff in consumer spending. But these consumers need more sophisticated financial products.

Look at the statistics. Online shopping in Guangdong ranks first in the country. Of 100 households, 43 have cars. Residential property markets turn over 100 million square meters of space every year. Seven of the country’s 12 youngest cities are here, with the average age of residents at least 10 years younger than the Yangtze River Delta. We need a better financial industry.

This is all before the rise of the industrial internet, thanks to the rollout of new 5G mobile networks, which will provide a golden opportunity for equipment leasing. Guangdong will be at the forefront of development of the industrial Internet of Things. This will quickly become a RMB 1 trillion industry. Through financial leasing, enterprises can better sell products that will be rapidly upgraded, rather than relying on longer product life-cycles.

The Greater Bay Area’s future clearly lies in cross-border finance. We have always attached great importance to this aspect, and we are applying technological solutions quickly. For example, we recently launched a provincial trade financing platform using blockchain technology. Orders are encrypted and tracked, verified with Customs and external management. There is no “false water” trade finance data, in other words. This platform is being trialed at the moment and is expected to be put into use by the end of October. Such innovations will provide a good support for cross-border capital flow monitoring.

The iterative development of the financial industry itself is a very important area of ​​technological innovation. Take the example of Webank (owned by Tencent), which opened less than three years ago. It has loans outstanding of RMB 3 trillion, with 150 million registered users, 70% of whom are blue-collar workers – and of these, 37% did not have any prior credit record. The bank’s average loan size is just RMB 8,000. They have extended more than 300,000 corporate loans without any written materials, approved within the same day.

Where is our banking industry going? Webank’s general ledger system is built on blockchains. It has fewer than 2,000 staff, half of whom are science and technology personnel. The ecology of the banking system itself is also changing.

Ping An Technology is another great example. It has more than 1,700 patents on financial technology, the world’s No. 1, surpassing Bank of America and many others. The company has 99,000 software engineers. Its voiceprint recognition, facial recognition, and artificial intelligence technology is world-leading.

Indeed, the development of technology is changing our world. Those who don’t keep up can only expect their financial leadership to be affected. Therefore, in the next step, we must pay special attention to the renewal and development of financial technology, and lead our financial technology companies to jointly promote the progress of everyone.