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.

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GBA Briefs: 1/16/2020

Macau downbeat on 2020: Macau’s tourism bureau says visitor arrivals could contract this year, due to a weak external environment. It would be the first time since 2015, and comes after 10% growth last year. Read more on GGRAsia.

HKEx busy: Hong Kong’s stock exchange had seven new IPOs start trading today, the best single-day performance in more than 18 months, while 2020 is shaping up to be a good year. Read more on SCMP.

Huawei’s UK saga: A day after PM Boris Johnson seemed to suggest he was fine with Huawei being in the UK’s 5G network buildout, one of his secretaries insisted the company would be kept out of its most sensitive areas. Read more on SCMP.

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. 

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Guangdong to deepen financial opening and innovation

Guangdong Governor Ma Xingrui says the province will continue to push reforms, especially in its financial system, and will continue to promote innovation as the economy’s structure is transformed. Educational institutions would be key for this, and investment would be allocated accordingly.

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GBA Briefs: 1/15/2020

Carrie Lam’s welfare ‘breakthrough’: Hong Kong CE Carrie Lam unveiled her plan Tuesday to spend HK$10 billion a year – including public transport fee deduction, increased statutory public holidays and housing subsidies – that would benefit more than a million people in the city, in a “breakthrough” in the government’s thinking. The announcement came days after she met with Luo Huining, Beijing’s new top official in Hong Kong. Read more on SCMP.

ICAC on Yuen Long attack: Hong Kong’s Independent Commision Against Corruption, the city’s graft-buster, pledged to look into the police handling of Yuen Long mob attack last July, although refusing to reveal any details, adding that ongoing civil unrest has added to the organization’s workload. Read more on SCMP.

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GBA property in 2019: Zhuhai, Shenzhen lead surge

The Greater Bay Area’s property market was generally stable last year, with two exceptions: Shenzhen and Zhuhai, where transaction growth was hot. 

According to local media, which reported on an analysis of official data by Penguin Financial, an investment adviser, Shenzhen was the beneficiary of policymaking in Beijing. The city’s designation as a Pioneering Zone for Socialism with Chinese Characteristics boosted market sentiment, resulting in new residential floorspace of 4.5 million sqm, up nearly 25%, while 37,846 homes were sold, up nearly 27.4%.

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Nansha grows 10%, but expects only 7.5% in 2020

Guangzhou’s special economic zone of Nansha has decided to follow a trend among the GBA’s economic growth engines to play down expectations for 2020. Following Dongguan and Shenzhen, which have said they expect growth in 2020 to be several basis points lower than 2019, the region’s fastest-growing major district has said its GDP will grow by only 7.5% in 2020, down sharply from more than 10% in 2019, according to a local media report.

The past year was a good one for Nansha, which has several major construction projects under way. Its GDP was expected to be about 160 billion yuan once official data is released, according to the local government. This would represent 10.3% growth over 2018, a significant surge from 2018’s 6.5% growth. 

Continue reading Nansha grows 10%, but expects only 7.5% in 2020

Shenzhen sees inflation ease; still high at 4.9%

When Shenzhen announced a sharp drop in GDP growth after Q3 last year, we, like many others, were stumped as to why it had happened. The only logical explanation was a sudden drop in industrial output, which was attributable partly to the trade war damping demand for exports and also to industrial upgrading, which had seen a hollowing out of the city’s traditional economic structure. 

What we missed, however, was a much simpler explanation: inflation. Nominal GDP had continued to grow strongly, but prices of goods and services rose more sharply than had been expected. This was a major reason for Shenzhen’s GDP growth falling from 7.4% at the end of Q2 to 6.6% at the end of Q3.

It is also a major reason, obviously, for the recovery in Q4, as Shenzhen ended the year back above 7%.

We don’t blame ourselves too much for this oversight, however. The city government had not flagged it for anyone, for obvious reason: Shenzhen, like the rest of the country, was engaged in quelling panic about a surge in pork prices after a major cull of the country’s hogs due to swine flu. 

The crisis seems to be subsiding, judging by latest CPI data, which show that pork prices fell 4.4% in December over November. However, the city’s inflation rate is still high at 4.9%. That is clearly because of a nearly 17% rise in average food prices overall in 2019; non-food prices grew just 2%.

Read more from Shenzhen Daily (in Chinese)

GBA Briefs: 1/14/2020

5G bullet: The High-Speed Railway between Guangzhou and Hong Kong has switched on its 5G network service, the first in China to do so. It only works outside of the Hong Kong border, though. Read more on Caixin. 

GBA jobs: A delegate to the provincial government CPPCC has suggested targeting those Hongkongers already studying inside Guangdong with job offers, as a way of winning the battle for their hearts and minds. Read more on SCMP.

Digital currency debate: Not everyone thinks China is ready for a digital currency, saying the pressure is off now that Libra is not happening. It’s being tested in Shenzhen at the moment. Read more on SCMP.

Trade up: China’s exports and imports both surged in December, above analysts’ expectations, even though the year as a whole saw a weak performance for foreign trade in US dollar terms. Read more on SCMP.