China

• China Venture Capital halved - Dow Jones 2Q 2015

38% of Global GDP from China's growth in 2014

• Largest retail market by 2018
• Big Country Diplomacy with Chinese Characteristics
• Recognizing China's clout

China to Ease Restrictions on Investing Overseas

SHANGHAI (Reuters) - China will ease restrictions on overseas investments by local firms and deals below US$1 billion (S$1.25 billion) will no longer need approval, the country's economic planner said in another step to cut red-tape and facilitate the growth of private investment.

Starting from May 8, Chinese firms planning to invest less than US$1 billion will only need to register with authorities rather than seek approvals from the National Development and Reform Commission (NDRC), the commission said in a statement late on Thursday.

In a series of sweeping reforms published in November, China promised to free up the market by simplifying administrative controls and to restrict central government management of microeconomic issues.

Lengthy approval times, which can take up to six months, have dented the competitive edge of privately-owned Chinese firms in their overseas acquisitions, since other foreign companies can adjust to changes in economic conditions at a much quicker pace, analysts have said.

- STRAITS TIMES, April 22, 2014

China and The West

• Britain will be China's biggest advocate in the West
• David Cameron's delegation to China - i.e. Businesses focussed on doing business with China

The new China

PUBLISHED NOVEMBER 29, 2013

China to open more markets to foreign investorsCurbs on sectors such as accounting, logistics, childcare facilities to be eased

BY

SC YEUNG

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China plans to ease the entry barriers for foreign investors in some sectors 

[HONG KONG] China plans to ease the entry barriers for foreign investors in some sectors.

Foreign investors have poured huge amounts of money into China over the years, fuelling the nation's economic ascent. Today, almost all the big global corporate names are present in the country, either to produce goods for export or to sell to Chinese consumers.

Now, having tasted success, firms are clamouring for more market access - a wish that could turn into reality soon, albeit partially.

In a bid to shore up the economy, China announced this week that it will lift the entry barriers for overseas investors in some sectors. The Ministry of Commerce, which oversees the country's business and investment policies, said it plans to ease restrictions on foreign investment in fields such as accounting and auditing, commercial logistics and e-commerce, and child- and elderly-care facilities.

http://www.businesstimes.com.sg/premium/china/china-open-more-markets-foreign-investors-20131129

Transparency 

PUBLISHED NOVEMBER 29, 2013

China to start making new officials disclose assets

[BEIJING] China is to launch a pilot programme to make new officials disclose their assets as part of an anti-graft campaign, the Communist Party's anti-corruption watchdog said on Friday.

The government has faced increasing public pressure to improve transparency around officials' wealth, especially after recent corruption scandals involving assets ranging from luxury watches to houses.

Under the programme, "leading cadres" who are newly appointed or promoted will have to disclose their assets, the occupations of spouses and children, and international travel records, the ruling party's Central Commission for Discipline Inspection said in an statement on its website.

It did not give details on how the assets would be disclosed or the extent to which they would be made public.

http://www.businesstimes.com.sg/breaking-news/asia/china-start-making-new-officials-disclose-assets

• New China targeting extravagant living
• China's Princelings

Blackstone buys 40% stake in China mall owner

Blackstone and ICBC International have bought a 40% and 6% stake respectively in SCP.

The world's largest private equity group and ICBC International acquire stakes in SCP, which manages shopping malls across the Pearl River Delta, Yangzi River Delta and Bohai Economic Rim.

By Alison Tudor-Ackroyd , Chris Dodd | 4 November 2013
Keywords: ma | china | blackstone | icbc international

Blackstone and ICBC International have bought a 40% and 6% stake respectively in SCP, a Chinese shopping mall owner.

Financial details were not disclosed but the value of Blackstone's stake is about $400 million, according to a person close to the situation.

The investment in SCP represents Blackstone's largest mall investment in the Asia Pacific region and gives the firm a platform to continue to invest capital in Chinese malls, whether that is through development of new malls or acquisitions of existing malls.

“With China’s economy increasingly driven by domestic consumption, the retail sector has tremendous potential," said Chris Heady, head of real estate in Asia at Blackstone. Retail sales have grown on average by 16% per annum over the past ten years in China; SCP has grown above the average rate for the past decade.

According to a statement, SCP will have a total asset value in excess of US$2 billion following the deal.

SCP owns and manages 19 shopping malls under three shopping mall brands, Incity, SCP Plaza and One City. Its projects span cities across the Pearl River Delta, Yangzi River Delta and Bohai Economic Rim, with flagship projects being Shenzhen SCP Plaza, Suzhou Incity and Hangzhou Incity. The average occupancy rate is kept at around 95% and leases relatively short in order to manage turnover of tenants as rents rise. Ten years ago SCP was a state-owned company, then it was recapitalized.

Blackstone, the world’s largest private equity firm, is a major owner of shopping malls with more than 110 million square feet of assets across Asia, Europe and the US. It is also an active investor in real estate in Asia.

Stephen Schwarzman, Blackstone’s chairman and chief executive, said in Hong Kong last October that China’s economic slowdown was creating opportunities to invest.

In August the group agreed to buy Hong Kong-listed property and construction group Tysan Holdings - which owns real estate in mainland China - for US$322.6 million.

It has also made investments in Shanghai, Dalian, Nantong and Wuhan. In one deal Blackstone bought Shanghai’s Huamin Imperial Tower, which has 50,000 square meters of office space.

Its investment in SCP comes primarily from its Blackstone Real Estate Partners Asia fund.
ICBCI is a Hong Kong-incorporated, wholly owned subsidiary of ICBC, the world’s largest bank by market value. It serves as the overseas investment banking platform of ICBC group.    --   2013 November   FINANCE ASIA

• Prince Al-Waleed buys stake in China's online retailer

Chinese developers flush with ca$h

Chinese property developers have more than $25 billion in cash on their books, but they are reluctant to spend money until uncertainties in the markets are resolved, according to a new report.

In the first eight months of 2013, China's real estate management and development companies, including such major players as Shimao Property Holdings and Greentown China Holdings, raised more than $16 billion from offshore bonds and loans, approximately 36 percent more than in the 12 months in 2012, according to Reuters, which studied data from 76 Chinese property companies.        >> MORE   2013 September

East is East

• Tax on Property Ownership in China imminent

Is the World Ready for China?

Stephen S. Roach

The Slow Boat from China

The world is having a hard time accepting a slowing Chinese economy. Hooked on 30 years of 10 percent average gains in Chinese gross domestic product (GDP), growth-starved economies around the world are desperate for more of the same. But it isn't going to happen.

Some six years ago, China's then premier, Wen Jiabao, posed a paradox that came to be called the "Four Uns": though China's economy looked strong on the surface, Wen argued it was increasingly "unstable, unbalanced, uncoordinated, and ultimately unsustainable." The debate those remarks sparked is now over, and a new Chinese growth model is at hand. China's 12th Five-Year Plan, enacted in 2011, calls for a shift to an economy driven increasingly by domestic consumption, rather than one driven largely by exports and investments.

China's new generation of leaders, President Xi Jinping and Premier Li Keqiang, are now focusing on implementing this daunting structural transformation. During the U.S.-China Strategic and Economic Dialogue on July 10-11, an annual meeting between high-ranking officials from the two countries, the opportunities and the risks of this rebalancing will feature prominently in the discussions.

For its part, China's new leadership is committed to rebalancing. With GDP growth slowing to 7.7 percent in the first quarter of 2013, and data for April and May pointing to more of the same, previous Chinese leaders would have quickly announced a new infrastructure program or other stimulus policies to spur the economy. By not introducing new spending initiatives, the government of Xi and Li has sent a strong signal that Beijing is now willing to accept slower growth. 

That conclusion was reinforced by last month's liquidity squeeze in the overnight bank funding markets. Because the People's Bank of China, the country's central bank, didn't intervene as it normally does in such circumstances, the interbank lending rate shot up on June 20, reaching a record of 13.4 percent -- more than four times the average over the last 18 months (it dropped back a few days later.) This lack of intervention sent a strong signal to banks, especially China's "shadow banks," that the days of risky and undisciplined lending must end. 

The message from China's fiscal and monetary authorities is clear: the days of open-ended hyper growth are over. At the same time, Xi has been calling for a "mass line" education campaign aimed at addressing problems arising from the "four winds" of formalism, bureaucracy, hedonism, and extravagance. Though cryptic, his message appears to underscore a new sense of political discipline, to complement the discipline of China's fiscal and monetary policies. The Chinese Communist Party, Xi seems to be saying, must realign itself with the core interests of the people and their requisite economic fundamentals.

China is at an important juncture in its development journey. It's determined to move away from the quantity dimension of growth to a new focus on the quality of economic development. This is not only about a downshift in GDP growth: it is also a critical shift toward the long dormant Chinese consumer, opening up one of the largest consumer markets in the world to anemically growing Western countries.

This is especially important for the United States, which continues to languish in a weak recovery with unacceptably high unemployment. Washington needs to push hard for free and open access to these markets, an issue that will undoubtedly be high on the agenda for the Strategic and Economic Dialogue.

While China's previous administration recognized the importance of structural change, they made disappointingly little progress. Slower growth doesn't work for China unless its economy undergoes a fundamental transformation. The new policy discipline of Xi and Li is important because it effectively ups the ante on China's rebalancing agenda -- making implementation of the 12th Five-Year Plan all the more urgent.

Page 2 of 2

For consumption to play its proper role in China's economy, three sets of reforms are essential: services-led job creation, urbanization, and a well-funded social safety net. The objective is to boost the consumption of Chinese citizens from its current share of 35 percent of GDP (by contrast, it is 71 percent in the United States) to 40 percent over the next three to five years, and to more than 45 percent by 2023.

The emphasis on services and urbanization should help increase personal income -- the mainstay of consumer demand for any economy. But a services-led China also holds the key to a sustainable slowdown in GDP growth, because services require roughly 30 percent more workers per unit of Chinese output than manufacturing and construction. In other words, China can accomplish the same labor absorption (i.e., employment of poor rural workers) with a services-led economy growing at 7 percent as with a manufacturing- and construction-led economy growing at 10 percent. With services comprising only about 43 percent of the economy -- the lowest share of any major economy in the world -- there is plenty of room for this sector to grow.

Urbanization is also an essential part of China's consumer-led transformation. Urban Chinese workers have per capita incomes of slightly more than three times their counterparts in rural areas. China's urban population reached 52.6 percent of the total population in 2012, up from 20 percent in 1981 and is projected to rise to 70 percent by 2030. As long as job creation, especially in the services industry, accompanies urbanization, a sharp boost in labor income generation is likely. But without a better safety net, Chinese families will keep saving too much and spending too little. The nation's vastly underfunded retirement system is a key aspect of this problem. China's focus has been on expanding the number of citizens enrolled in the retirement and healthcare plans; emphasis now needs to shift to providing more funding for the plans.

While this is a daunting agenda, the new policy discipline of the Xi-Li administration raises the probability of a successful consumer-led rebalancing. If it does succeed, there are three things the world should expect from China: First, Chinese GDP growth will likely hover at 7 or 8 percent over the next decade. The labor intensity of services suggests China can grow in this range and still generate enough jobs and income to maintain social stability.

Second, services-led growth means a move away from resource-intensive manufacturing. While this may pose problems for countries in China's resource supply chain -- especially Australia, Brazil, Canada, and Russia -- it offers the possibility of reduced environmental degradation and pollution, making for a cleaner and greener Chinese GDP.

Third, the emergence of the Chinese consumer is a potential windfall for the developed world. That's especially true in services, where China has little experience or expertise. China's embryonic services sector could increase from $3.5 trillion in 2012 to $15.9 trillion by 2025. Increasingly tradable in a connected world, this $12.4 trillion surge could translate into a $4 trillion to $6 trillion bonanza for foreign companies.

The transition won't be seamless, nor will it happen overnight. But like most of its accomplishments in the post-Mao era, China's development clock runs at roughly four times the speed of others. The Strategic and Economic Dialogue must recognize the opportunities arising from the coming transition to slower, better balanced, and more sustainable Chinese growth.

• Gold vaults open in China

Asia Life Co's

• Expansion of Growth Industry -> Many Assets to Acquire & Manage
• Beijing allows 30% in equities & 10% more, if blue chip
• New breed of Trophy Property Investors - in London and New York
• Taiwan relaxes oversea investment restrictions
• Taiwan insurers push for Outbound investments

Asian Insurers to Invest $75 Billion in Global Real Estate as Regulations Ease 

According to global real estate consultant CBRE, the increasing liberalization of regulatory restrictions on Asian insurance funds could lead to an additional US$75 billion entering global real estate markets by 2018, with New York and London among the key targets.
 
Insurance companies in Asia are generally under-allocated to real estate because of stringent regulations, especially around overseas assets. Most of their overseas allocations are in liquid and transparent assets such as equities, cash, fixed income and government bonds. This situation is changing as several countries such as China, South Korea and Taiwan have started to allow overseas direct investments, higher allocation to real estate and a simplified approval process.
 
The asset size of the Asia insurance sector is also growing fast, having increased 13% between 2008 and 2013. CBRE predicts that the combined effect of an increase in Asian insurers' asset sizes and increasing liberalization will result in their investment assets growing from US$130 billion in 2013 to US$205 billion in 2018. This would translate into additional inflows of about US$75 billion into real estate - including direct and indirect real estate investment.
 
Compared to mature markets, there is a lack of investible assets in Asia. This, coupled with the recent rule relaxations, means more Asian insurers are investing in global markets. In 2013 alone, there were about US$2.4 billion of direct commercial real estate purchases by Asian insurers outside Asia Pacific. Typically, these insurers have a strong preference for trophy assets in gateway cities, particularly when they make their first overseas investments. The top cross-border destinations are London and New York, though it varies by country where their insurers are looking to invest.
 
Chinese and Taiwanese insurance companies are likely to be more active in overseas real estate markets given lack of opportunities and low yield levels for prime core assets in their domestic markets. Direct real estate investment will be their preferred channel given their preference for full ownership. Japanese insurance firms are expected to stay in domestic markets as they have been hurt by overly aggressive overseas investments in the 1990s. South Korean insurance companies have invested overseas over the past years and they have accumulated experience in overseas real estate markets. CBRE expects that Korean insurers will use more indirect channels to expand their global portfolios.
 
Marc Giuffrida, Executive Director, CBRE Global Capital Markets tells World Property Channel, "Given the low yield levels and the shortage of investable stock, particularly stabilized income producing assets in domestic markets, Asian insurance companies will have to explore opportunities in overseas markets. The lack of overseas real estate investment experience and the need for regulatory approvals is likely to mean activity will be limited initially to larger insurance companies with strong financial capability securing assets in major global cities, however as experience is built up we expect the tier two players to emerge in cross-border acquisitions and explore indirect strategies."
 
Ada Choi, Senior Director of CBRE Research also commented, "CBRE expects the increase in capital deployment to real estate by Asian insurers will grow largely in tandem with the total asset size of the sector in the next five years. Looking ahead to the longer term, liberalization for insurance companies will speed up the pace of international real estate investments by Asian insurance companies. We expect that further relaxation on overseas real estate investment will take place as regulators gain more confidence about overseeing such investments and insurance firms become savvier about investing globally."
 
According to the insurance regulators in 10 Asia jurisdictions, total insurance assets reached the level of US$6.7 trillion in Asia as at the end of 2013, higher than US$5.8 trillion in US and US$3 trillion in the UK. Japan is the largest insurance market by assets, controlling US$3.3 trillion of assets while the rest is largely held by insurers in China, South Korea and Taiwan. These four countries collectively control about 90% of the insurance assets in Asia.
 
Giuffrida further added, "Asian insurance companies have seen the positive results pension plans and sovereign funds have achieved from increasing their exposure to global real estate. Importantly there is now evidence and precedence in place which both regulators and investment committees can point to which may relieve concerns around the risk/return tradeoffs."
 
Industry statistics indicate that at the end of 2013, the real estate makes up on average just 2% of Asian insurers' portfolios - US$130 billion, which includes direct real estate and indirect real estate investments as well - which comprises 1.0% in China, 1.8% in Japan and 2.4% in South Korea. By comparison developed markets typically allocate 4-6% of their assets to real estate, while the figure stands at 6.7% for the US and 5.1% for the UK. For Asia, Taiwan stands out as the one market that has relatively high real estate allocation of 4.8%; however, this capital has been trapped within Taiwan itself, with overseas investments only allowed since 2013.
 
Asian insurers are also growing rapidly, particularly over the past five years, due to a low penetration relative to the west combined with fast economic growth. Insurance premiums in China alone have grown by over 10% per year on average for the past five years. Moreover, insurance business in Asia still has significant potential to grow.
 
Country by Country: How De-regulation is Happening
 
Countries around Asia are taking differing approaches to liberalization:

• In China, South Korea and Taiwan, relaxation of real estate investment among insurance companies has accelerated over the past two years by increasing their maximum real estate allocation and permitting as well as streamlining the procedures in investing in property abroad.

• China allowed insurance companies to invest abroad in 2012 and increase the maximum allocation in real estate (both domestic and foreign) from 20% to 30% of total assets in February 2014.

• The Taiwanese regulator has allowed insurance companies to invest overseas since 2013 and is permitting insurance companies by using shareholder loan for their overseas acquisitions.

Source: CBRE Research

-  World Property Channel

• Tycoon Richard Li buying life co's.
• Ping An Insurance eyes high-yielding overseas properties
• Ping An purchase of Lloyd's Building in London

With over US$14 billion (S$17.84 billion) available for overseas property investment, Chinese insurance funds will likely target high transparency markets such as Singapore, Canada, US and the UK, revealed a CBRE report.

In fact, prime high-end office properties in core international cities are expected to be highly sought due to "scarcity of investable prime properties in first-tier Chinese cities and the short-term risk from the oversupply in second- and third-tier Chinese cities", the report said.   

While still new in cross-border real estate investment, Chinese institutional investors have ramped up investments in overseas property, on the back of local currency (RMB) appreciation, abundant liquidity, limited investment channels in China and the relatively lower valuation of overseas assets.

Notably, the total assets of China's national insurance institution amounted to US$1.2 trillion (S$1.53 trillion) in 2012. The new government policy allows these institutions to invest up to 15 percent of their total assets in "non-self-use" real estate. "

By this measure, there is in excess of US$180 billion (S$229.32 billion) currently available for real estate investment. Based on patterns of insurance fund allocations witnessed in developed countries in recent years (with most insurance funds typically allocating up to six percent of their assets to direct property investment) and assuming an 80:20 split between domestic and overseas market, it is estimated that Chinese insurers could invest up to US$14.4 billion (S$18.35 billion) in overseas real estate," noted the report.

Responding CBRE's Executive Director, Global Capital Markets, said: "Chinese insurance institutions are already well established in domestic markets, but following a series of government policy changes, they will look to target overseas commercial real estate markets."  "The insurance industry, in particular, is thriving; buoyed by ever-increasing funds they will target gateway cities around the world such as London, New York, Toronto, Singapore and Sydney in increasingly large amounts. 

The low liquidity, value-added potential and stable cash flow of prime office and retail assets offers a perfect match for these investors," he added.   --Yahoo! Finance Singapore