ChinaLat Law : China and Latin America Litigation Lawyer & Attorney : Diaz, Reus, Rolff & Targ Law Firm : Trade, Business, Dispute Resolution

When choosing to establish operations in China, many companies will think about Shanghai, the business and financial center of China. But the reality is that Shanghai is over-developed, especially for factory installations. There are cheaper alternatives that still allow a company to take advantage of Shanghai’s resources and geographical location. One such place is TaiCang City which is just a 90 minute drive away.

Diaz Reus attorneys have serviced client interests in TaiCang and have negotiated with officials on several occasions. We have met with the TaiCang Bank of China branch President, the TaiCang Vice-Mayor (Sheng Lei), and officials at the Land Development Office and Port Development Zone. They are all accommodating and welcome all inquiries from foreign companies interested in investing in their city.

Taicang, located in the southeast of Jiangsu Province, borders the Yangtze River on the east and Shanghai on the south. It covers an area of 823 square kilometers, of which 649 square kilometers is zoned for factories and other industrial sites. Most investors in Taicang come from Germany, U.S.A, Japan, Korea and Hong Kong, who have contributed to the already USD5.1 billion of foreign investment in TaiCang.

The TaiCang Port has a 38.8 km-long deep water coast line, which allows for 4th and 5th generation container berths. It is identified by the Beijing Government as a main-line container terminal and the core port of the Shanghai International Shipping Center. As of 2008, 57 international and domestic sea-lanes have been opened.

For TaiCang inquires, contact our Diaz Reus - Shanghai attorneys at:
aehrlich@diazreus.com
shu@diazreus.com

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by Tom Lydon

China’s recent $250 million decision could help Latin America-related exchange traded funds (ETFs).

China Investment Corp. (CIC) has decided to inject $200 billion into their sovereign wealth funds, and $250 million of that is going toward emerging markets, reports Irwin Greenstein for Seeking Alpha. It turns out China must diverge from the falling dollar and tap into greater reserves such as Latin America, which can generate the energy necessary for China’s development.

CIC is responsible for managing part of China’s foreign exchange reserves, and it’s the sixth-largest sovereign wealth fund in the world. It began operations on Sept. 29, 2007. Sovereign wealth funds are huge investment organizations owned by central banks and are accountable to no one.

CIC’s emerging markets plan has two focal points:

1) Diversifying out of their $1.7 trillion in foreign-exchange reserves, mostly U.S. treasury bonds and fixed-income assets

2) Gaining control of energy reserves

Just as other dollar investors are, CIC is taking a hit as the second-largest holder of U.S. Treasury securities.

Latin American ETFs might benefit from this move toward diversification:

iShares MSCI Brazil Index (EWZ): up 0.8% year-to-date
iShares S&P Latin America 40 Index Fund (ILF): up 2.8% year-to-date
SPDR S&P Latin America (GML): up 0.6% year-to-date

Source from http://www.etftrends.com/2008/07/chinas-redirected-foreign-investment-could-help-latin-americas-etfs.html.

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Mexico is currently being considered as an alternative sourcing option to China, especially by some US-based supply chains eager to bring production closer to home. Yet they are not the only ones hoping to find new opportunities in Mexico, so are manufacturers from....China.

At the Supply Chain Digest, Dr David Simchi-Levi of MIT has proclaimed that the dramatic rise in fuel prices and transportation costs of recent times constitutes a tipping point where logistics costs have started to negate the unit cost advantages of China and other Asian countries. As a result, Simchi-Levi has noted a number of companies that have either put Asian offshoring on hold or have brought production back to domestic or nearshore sources, the so-called in-sourcing (or near-shoring) phenomenon that is raising Mexico's profile for US sourcing and supply chains.

And logistics costs are not the only concerns with China. As this article from IHT outlines, inflation, rising labor costs, shortages of workers and energy, a strengthening currency, and dwindling tax breaks for foreign investors all have multinationals encouraging their suppliers to diversify out of China. With the so-called China plus one strategy, companies are expanding their bases elsewhere in Asia (particularly Vietnam) so as not to be overly dependent on factories in one country. Yet few companies are actually closing factories in China, and for those with large operations in China, China plus one is only a strategy intended to mitigate risk and control costs.

If US supply chains are not about to retreat en masse back to Mexico, expanding Chinese auto manufacturers are preparing to advance into Mexico to get a foothold in America. Following the Chinese company First Auto Works, who announced plans to build an assembly plant in Mexico with Grupo Salinas, private Chinese auto manufacturer Geely Automobile this week also announced plans to move ahead with construction of an assembly plant in Mexico to supply both the North and South American markets. Geely and a local partner will invest up to $270 million to build a factory in Leon, capital of Guanjuato state in central Mexico. With the plant eventually set to have an annual capacity of 300,000 units, Geely wants Mexico to be a stepping-stone for achieving its ambitions of conquering the US market.

And Geely might pave the way for a host of Chinese manufacturers to head into Mexico. With China now being Mexico's second largest trading partner, during his visit to China in July Mexican President Felipe Calderon invited Chinese business leaders to invest in Mexico:

We do want global investment, and if there are (Chinese) companies that are thinking about investing in other (Latin American) nations, but those nations are not hospitable to investment, they should know that they are welcome in Mexico and we protect their rights.

So if some US supply chains are forced to head back closer to home in Mexico, manufacturers in China are prepared for a big push westwards, to Mexico and beyond.
 

Source from http://www.chinasourcingblog.org/2008/08/

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Melinda Peer, 05.21.08, 6:50 PM ET

Sino-Global America shares set sail Wednesday, billowing 80.4% in its trading debut on the Nasdaq Capital Market.

Investors see the Chinese shipping services company as a way to capitalize on the country's voracious demand for iron ore. The stock added $6.23, closing at $13.98 a share.

Sino-Global America is China's leading nonstate-owned shipping company and competes directly with the partially government-owned companies Penavico and Sinoagent. Combined, the two companies account for 85.0% of the market share for Chinese shipping agencies.

"These competitors have significantly greater financial and marketing resources and name recognition than we have," the company said, addressing possible risks to the company's success.

According to Sino-Global's registration filing with the Securities and Exchange Commission, total sales for Chinese shipping agencies were $1.5 billion in 2006. In 2007, the company's sales rose 13.1%, to $10.1 million, from $8.9 million in 2006.

Sino-Global expects to receive $9.5 million for maximum net proceeds of $8.2 million--the majority of which it intends to use to expand its business in 15 to 35 Chinese ports. The company filed an initial public offering of 1.2 million shares priced at $7.75 a share. Anderson & Strudwick acted as the lead placement agent for the offering.

Investors obviously see a lot of potential for the company, which has primary executive offices in Flushing, N.Y., and Beijing, since China is the world's biggest importer of iron ore. According to Sino-Global's filing, China imports about 43.0% of the world's iron ore and relies on the three companies for 75.0% of its iron ore shipments.

"China is currently the world's largest importer of iron ore, and global shipping capacity has been unable to keep pace with China's demand for iron ore, resulting in the cost of iron ore to China of 9.5% in 2007," the company said, adding that iron shipments comprise the bulk of its cargo.

Sino-Global incorporated in New York in 2001 to better develop its North American client base. The company acts as a local agent for its customers with its range of services, which includes customs assistance and help with ground transportation.

Shipping rates are expected to surge even higher in the wake of Monday's earthquake since China will become more reliant on imports--particularly for construction materials as the country begins the rebuilding process. (See: China's Quake Boosts Dry Bulk Rates)

On Wednesday, China's National Development and Reform Commission said stockpiles of imported iron ore at its ports totaled a record 79.2 million tons as of May 15. Steel mills have been hoarding iron ore at Chinese ports in anticipation of further domestic price hikes for the raw material, said Liu Baoyao, a steel analyst with Guangfa Securities. China warned that it would penalize mills that engage in hoarding.

China imports iron ore primarily from Australia, Brazil and India. (See: China Can't Get A Break On Indian Iron Ore)

Thomson Financial contributed to this article.
 

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China is to broaden the investment channel of insurance funds, allowing them to invest in real estate industry, if a draft revision to the Insurance Law is adopted by the national legislature.

Investment channel of insurance funds would be widened to marketable securities such as bonds, stocks, funds and real estate industry, according to the draft submitted to the Standing Committee of the National People's Congress (NPC) on Monday.

The current law only allows insurance funds to invest in government bonds and financial bonds.

"It is necessary to revise the law to boost the steady and fast development of the insurance industry. It will help to better regulate insurers' business conduct, prevent and control risks and protect insurants' interests," said China Insurance Regulatory Commission chairman Wu Dingfu when explaining the draft at the fourth session of the NPC Standing Committee.

The revision also highlights tighter supervision of insurance fund using, in a bid to prevent investment risks.

The legislative session is scheduled to end on Friday.

Source: Xinhua

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From: http://www.chinavest.com/

Last month, we reported that China’s economy enjoyed a strong first half of 2008, despite
the fact that economic growth did not approach 2007’s figure of 11.9%. We also noted that
growth is expected to slow significantly in H2 and as we enter 2009. Now, early indicators
are beginning to show that these assertions are coming true.

While China is moving away from exports and toward a high-tech and domestic consumer
driven economy, the country’s growth still remains very much export-driven. When export
growth slows, economic growth slows. Export growth seems to be falling at an eye-opening
rate, with volume growing at only 5.9% in June over the same period in 2007. By
comparison, in July 2007 export volume was still growing upwards of 28%.There are a
number of factors that have contributed to the problem. These include the sub-prime driven
slowdown in the West, Beijing’s reduction of VAT rebates for many exporters, and the rapid
appreciation of the RMB in 2008, among others.

The effect of the slowdown in the West is obvious—the U.S. and Europe are consuming less,
and orders to Chinese exporters in recent months have suffered as a result. The reduction
in VAT rebates was introduced last summer by Beijing as part of a series of tightening
measures designed to cool the economy, which at the time was in danger of overheating.
The effects were delayed, and have really begun to hurt exporters in 2008; many firms that
export low-margin products depended on those rebates to maintain profitability. Regarding
the currency appreciation issue, rapid RMB appreciation hurts exporters because the USD
payment they receive for their goods becomes less valuable.

Beijing has responded to the signs of a slowdown, declaring a change of monetary strategy.
In a recent Politburo meeting, the directive was altered from a strategy of tightening and
inflation control to a strategy of maintaining reasonably fast growth while controlling
inflation. “We must maintain steady, relatively fast development and control excessive price
rises as the priority tasks of macro adjustment,” said President Hu Jintao. As part of the
alteration, loan quotas have already been raised by about 5% for small- and medium-sized
enterprises (SMEs), and we’ll likely see Beijing slow the appreciation of the RMB for the
remainder of the year. VAT rebates have also been bumped up for textile manufacturers.
Along with a number of other industries, textile exporting had been hit hard by the reduction
in VAT rebates due to its lower margins. Although China is moving away from economic
dependence on lower value-added exports, regulators are now taking steps to make the
process more gradual in an attempt to avoid too rapid an economic slowdown and a
subsequent hard landing.

We’ll also keep an eye on how the People’s Bank of China (PBOC—China’s central bank)
responds to the country’s new change in economic strategy. For the last year and a half,
PBOC has used a series of hikes in the required reserve ratio for banks and hikes in interest
rates to remove money from circulation, control loan growth, and attempt to reign in
inflation. With the new focus on maintaining growth rather than slowing growth, and with
inflation control still at the top of the agenda, it will be interesting to see how PBOC alters its
course.

Incidentally, although many had expected a post-Olympic malaise, the impending slowdown
has almost nothing to do with the Olympics. Despite the significance of the Games, they
have much less to do with the state of the economy than the factors mentioned above.

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