Category Announcements

Hyundai builds 2nd China plant

Apr. 18, 2006. 07:32 AM
ASSOCIATED PRESS

SEOUL ¡ª Hyundai Motor Co., South Korea’s top vehicle maker, said Tuesday it has begun construction on its second auto plant in China, a project involving a total investment of $1 billion (U.S.).

The Beijing plant, which will also include a new research centre, will have an annual capacity of 300,000 vehicles as Hyundai expands its presence in the world’s fastest-growing auto market, the Seoul-based company said in a statement.

“Through continuing growth in China, which is an important center of our global strategy, we will establish our firm position as a global auto maker,” Hyundai chairman Chung Mong-Koo said in the statement.

Once construction is completed in 2007, Beijing Hyundai Motor Co., a 50-50 joint venture with between Hyundai and Beijing Automobile Investment, will have an annual production capacity of 600,000 vehicles a year from 2008, the statement said.

Hyundai Motor already has a plant in Beijing with an annual capacity of around 300,000 vehicles.

The new plant will create about 3,200 jobs and will add five new models in China, on top of five models that are currently being produced at Hyundai’s existing plant.

Beijing Hyundai Motor sold 66,814 vehicles this year through March from a 2006 sales target of 300,000 vehicles. In 2005, Beijing Hyundai sold 233,668 vehicles.

Hyundai, along with its affiliate Kia Motors Corp., aims to become the world’s sixth-largest carmaker by 2010 and is aggressively expanding overseas production to meet the goal.

Last month, Hyundai announced that it will build a plant in the Czech Republic, while Kia will build a plant in the U.S. state of Georgia.

Hyundai has four overseas production bases in China, India, Turkey and the U.S.

Sony Ericsson To Increase China R&D Staff

Sony Ericsson plans to increase the staff at its China R&D center to 350 by 2008, Shanghai Youth Daily reports. The company’s China R&D center was founded in 2004. On April 10 Sony Ericsson released the Z530c handset, the company’s first handset model to be designed and produced entirely in China.

China eases capital, forex curbs for banks

SHANGHAI, Apr 18 (AFP)

China issued rules today that allows its banks to invest capital overseas on behalf of their clients, a move that brings the nation a small step closer to full convertibility of its currency.

The relaxation of forex controls came as Chinese President Hu Jintao was scheduled to leave for the United States where discussions with President George W Bush are expected to focus on currency and trade issues.
“The approval aims to meet domestic demand for overseas investments, and to effectively promote balanced international payments,” the central bank said in a statement on its website.

“It is also meant to further open the financial markets to the outside world and is an important step in promoting the gradual convertibility of the yuan.”
The US accuses China of moving far too slowly on reforms to its tightly controlled currency, and has threatened punitive tariffs if the Asian giant does not make greater efforts to loosen the unit.

Today the central bank said the measures were necessary to meet increased demand from Chinese companies for a wider choice of investment channels.
The announcement issued jointly by the People’s Bank of China (PBOC) and the State Administration of Foreign Exchange (SAFE), further clarifies last week’s limited reforms to the capital account.

Last Friday the central bank said qualified local banks would be allowed to pool capital from institutions and individuals and buy as yet unspecified amounts of foreign exchange for investment in fixed-income assets overseas.
Domestic fund management firms and securities companies are also permitted to invest institutions’ and individuals’ foreign exchange, again in yet unspecified amounts, in foreign securities, including stock markets.

Execs see China as place to boost career

By KATHERINE YUNG / The Dallas Morning News

Bobby Carter shows all the symptoms of China fever.

Each week, he meets with a private tutor to learn Mandarin. On airplanes, he listens to language tapes. And in his spare time, he reads books about the Asian powerhouse and blogs written by expatriates living there.

China “is really intriguing to me. I want to experience it,” said Mr. Carter, 44, UPS’ international sales and marketing manager for the Southwest region.

Although he’s traveled in the region for his job, now he wants to work full time in China, for at least a few years.

“Who would think in our lifetime we would have the opportunity to be pioneers in anything?” he said.

As China evolves into an increasingly important market for many U.S. companies, a growing number of Americans are eager to work there, despite potentially formidable obstacles of language and culture.

Interest in China extends beyond multinational corporations. Increasingly, managers at small- and mid-size businesses are volunteering for forays in China, seeking excitement, riches and a career boost.

“It’s not a hardship,” said Louisa Wong-Rousseau, managing director of China for Stanton Chase International, an executive search firm. “People see going to China as a career advancement.”

Though many in China prefer to hire locals, a shortage of skilled executives means expatriates remain in demand, said Lisa Johnson, director of consulting services for Cendant Mobility, a large relocation company.

Many companies award assignments in China to their rising stars, she said. “It’s where a lot of companies’ future is.”

According to a Cendant Mobility study conducted last year, people moving to China for business reasons are typically married men in their early 40s.

Shanghai, China’s most cosmopolitan city, ranks as the top destination for expatriates. But a growing number of them are headed to less well-known places such as Chengdu, Dalian and Tianjin.

For example, Dallas attorney Ryan Greene recently accepted a job with EnterHealth China LLC, which manages two hospitals in the Chongqing area. The firm aims to become a leading provider of health care services in China.

Mr. Greene, 34, already has an apartment leased and furnished for him in Chongqing. Initially, he plans to spend half his time in the southwestern Chinese city and the remainder in Dallas.

‘Industrial revolution’

After three trips to China, he has developed an admiration for the Chinese people’s work ethic and culture. “In the next five to 10 years, everyone is going to be going over there,” he said. “I want to be on the leading edge of that transition.

“What’s happening there is so amazing,” he added. “It’s the industrial revolution in early 19th-century America all over again.”

Americans who have taken the plunge and moved to China often find the experience an eye-opener.

In November 2004, Nokia Oyj employee Ron Davenport sold his house and two cars in Grapevine and moved to a gated community in Beijing.

Now, he is helping develop low-cost phones at Nokia’s product creation center in Beijing.

“The pace is quite frantic,” Mr. Davenport, 41, said of the Chinese business environment. “But I am much more sensitive to growth in other parts of the world.”

For Mark Abe, living in China became a necessity. The 40-year-old executive for Plano-based Electronic Data Systems Corp. arrived in Beijing three months ago to help his company win information technology services contracts from Chinese airlines, airports and other air services providers.

“It’s very hard to build those relationships when you’re flying in and out,” he said.

The expatriate from Orange County, Calif., quickly learned that conducting business in China requires forming personal relationships, not just making sales calls.

“The business models that are prevalent here in China are different from ones in other parts of the world,” he said, referring to the nation’s many state-owned firms.

“Don’t wait,” he advised others considering working in China. “The country is changing so fast. Jump in with both feet and don’t look back.”

A few challenges

Taking on a China assignment does involve some challenges and adjustments.

Chief among them is finding health care that meets U.S. standards, according to the Cendant Mobility study.

An unhappy spouse and children can also cause problems.

“Make sure your family really wants to come,” said Mr. Davenport, who moved to Beijing with his wife and two of his three daughters. (The oldest daughter lives on her own in the U.S.)

Mr. Davenport said his wife and daughters are thriving in Beijing because of their outgoing and independent personalities. His middle daughter has found a new hobby, snowboarding in the nearby mountains. His youngest, a second-grader, is studying Mandarin.

Once expatriates and their families adapt to life in China, the hardest part is often coming home.

Attorney Carter Meyer endured a difficult transition when he and his wife returned to Dallas in August 2004 after living in Beijing and Tokyo for a little more than two years.

“It was hard getting used to it,” he said. “I missed the [Chinese] food quite a bit. I missed the people.”

During his time abroad, Mr. Meyer traveled throughout Asia. In China, language didn’t prove to be a huge barrier because most of the professionals he met spoke English.

And to their delight, he and his wife were able to save a lot of money but still live comfortably, with help from a driver and a housekeeper.

Mr. Meyer, 37, recently left Vinson & Elkins to become head of a small venture capital firm. But if the right opportunity came along in the future, he would consider going back to Asia.

“On a résumé, it has a lot of credibility,” he said of his time spent in China. And “I appreciate the size of the world a lot better.”

http://www.dallasnews.com/sharedcontent/dws/bus/stories/032106dnbuschinawork.296484f.html

What China Wants, China Plans to Get

http://www.amcham-shanghai.org/AmChamPortal/MCMS/Presentation/Resources/News/News.aspx?Guid={787692D1-280E-4710-9475-D7061FB81F88}

SHANGHAI — China, the world’s fastest-growing major economy, is hoping to turn its voracious appetite for raw materials to its advantage by using its heft as a consumer to get better prices.

The long-range strategy, still in its infancy, calls for China to transform its young futures markets into global price setters for products ranging from oil to metals to cotton. In the shorter term, China hopes to overhaul its procurement system, better coordinating the many separate purchases it now makes in global markets, in part to avoid unwittingly bidding against itself.

China’s heavy dependence on imported raw materials gives it a strong incentive to hold down prices. The country imports almost 30% of its oil, 45% of its iron ore and 44% of its requirement for 10 nonferrous metals, according to Zhu Zhixin, vice chairman of China’s planning ministry and an outspoken advocate of overhauling the country’s purchasing. But China’s approach to the challenge shows that as it integrates itself into the global economy, it isn’t willing to surrender entirely to market forces.

Futures markets allow buyers and sellers to limit their price risks by agreeing to exchange a commodity at a specified time in the future at an agreed-upon price. Chinese officials, however, view them largely as venues to control prices. “If we want to increase our competitiveness, then we must develop futures [markets] to grasp our right in setting prices for bulk commodities,” Zhou Zhenqing, a member of the financial and economic committee of the National People’s Congress, said earlier this month.

China is now the world’s leading consumer of copper, for example, using 20% of the world supply, or almost 1? times as much as the U.S. But, rather than being set in China, global copper prices are determined on the London Metal Exchange, where traders — based partly on their forecasts of Chinese demand — have bid up copper prices threefold over the past four years.

Key Chinese policy makers argue that influence over the market should shift eastward as China becomes the biggest buyer of global commodities. Jiang Yang, chief executive of the Shanghai Futures Exchange, noted in a recent speech that grain futures were invented in China during the Song Dynasty some 800 years ago.

Chinese officials aren’t satisfied with suppliers’ explanation that unprecedented demand from China justifies unprecedented pricing. Indeed, a Chinese copper trader who racked up heavy losses in recent months — and inadvertently sent copper prices soaring — may have been trying to signal that Beijing thought London copper prices were far too high, by putting in massive orders to sell the metal there.

China’s long-term answer to its raw-materials crunch is to build up its own futures markets. Those exchanges, one each in Shanghai, Dalian and Zhengzhou, are considered among the most modern parts of China’s financial system. In recent years, they have been restructured to focus on products the country uses in vast quantities: copper, aluminum, oil, rubber, soybeans, wheat, corn and cotton.

The goal is to make them “a determining force in setting prices globally,” says Wang Weiyun, the head of research at the Dalian Futures Exchange, which trades agricultural products.

A crisis in cotton led to China’s strategy. In 2003 and early 2004, China National Cotton Reserve Corp. had an estimated $72 million loss after traders on the New York Board of Trade bid up cotton futures prices by 40% in just a few weeks. China’s view was that traders on the world’s leading cotton exchange had overreacted to a Chinese government forecast of a shortfall in the nation’s cotton production. Rather than simply considering how to improve its trading performance on cotton markets overseas, China set up its own cotton-futures market.

Less than 18 months after Chinese cotton-futures trading began in June 2004, cotton volume on central China’s Zhengzhou Futures Exchange sometimes tops that of the Nybot, the bellwether market for cotton. More importantly, the Chinese market is emerging as an alternative venue for pricing. “We talk about the Chinese futures [prices] every day,” says Ed Jernigan, a cotton trader and analyst who runs his own firm in Nashville, Tenn.

The credibility of China’s futures markets is crucial to the country’s commodity strategy. That means futures prices on Chinese exchanges can’t vary too much from world prices. But in a bid to expand their influence, China is urging state-owned importers to specify in long-term purchase contracts with foreign suppliers that prices reflect those set on the Chinese exchanges.

While the Chinese government can’t unilaterally set prices on the exchanges, it does have influence. In China’s futures markets, which are flush with speculators, government trading houses tend to be the most important players, even if they aren’t always the biggest traders. Government influence is magnified by the fact that Chinese futures markets still lack some of the participants, such as hedge funds, and some of the access to information that help to keep trading active in the West. The government said this month it may open Chinese commodity exchanges to foreign traders, though under strict controls.

Overseas, meanwhile, China is trying to become a savvier trader on markets such as the LME and the Chicago Board of Trade, which trades soybeans and grains.

The country’s strategy often involves simultaneous trades on foreign and Chinese exchanges using arbitrage, a tactic that seeks to exploit price differences between markets. But no trading strategy comes without risk.

Over the summer, Chinese trader Liu Qibing, working for the Chinese agency that stockpiles commodities for the government and the military, bet massively that copper prices would fall from then-record levels. Instead, they rose another 30% and left the government on the hook for hundreds of millions of dollars in potential losses. The bill for those losses starts to come due today on the LME.

Around the end of last year, as copper’s price on the LME began to rise faster than on the Shanghai Futures Exchange, Mr. Liu started “shorting,” or selling copper, in London and making offsetting purchases of the metal in Shanghai, traders familiar with the activity say. To profit, he had to make more money in one market than he lost in the other.

As copper started to reach new highs above $3,000 a metric ton in July and August, hedge funds started betting against him in London, where Mr. Liu’s massive plays amounted to pledges to sell hundreds of thousands of tons of copper at prices far below what they are today, Dow Jones Newswires has reported.

By mid-November, copper exceeded $4,000 a ton, and it closed at a record $4,467 in London this month; yesterday, it closed at $4,426.

China’s government has made no public comment about the 37-year-old Mr. Liu, and his whereabouts are unknown, but its efforts to signal that global copper supplies are ample and that prices should fall suggest it is taking responsibility for Mr. Liu’s losses. As unofficial estimates of those losses topped $200 million, the State Reserve Bureau, where Mr. Liu has worked 15 years, and state-owned Chinese trading houses began an aggressive campaign aimed at wrenching the London copper price lower before today — the delivery date for the copper Mr. Liu contracted to sell on the LME.

The campaign has included copper auctions from state stockpiles and heavy sales of copper on the Shanghai Futures Exchange. As of a result, nervous traders in London have been watching the metal’s price on the Shanghai Futures Exchange more closely than ever.

(www.dacare-group.com)