Recently in China Category

The 798 District of Beijing is a fascinating place. The artists who work there are truly talented and original. Not all of them, but a good number of them. This sculpture is a particular favourite. The artist, whose name I don't know, I'm afraid, is very famous, at least out there. If you know it, please comment with his name. Meanwhile, just enjoy the image:

The title of this entry is not likely to entice the casual visitor to read on. I don't suppose that 0.05% of the population of the EU have ever thought about carbon steel fastenings, let alone how many are imported from China, let alone what the EU Trade Commission decide about the pricing of these things.

I didn't until I discovered that no Chinese factory will quote for fastenings to be supplied to the EU. Even plasterboard kits, with the board itself, channelling and fastenings, are impossible to obtain quotes for. It is remotely plausible that the Chinese really are seeking to destroy EU factories making nails, but it's hard to imagine that this is a more plausible explanation than that Chinese factories have such a huge advantage in terms of currency exchange rate and the costs of all factors of production that they can indeed sell for less than the marginal cost of production in EU factories, especially in high-cost economies such as Germany, France, Italy and the UK.

The result is that competition is destroyed and we have all ended up paying more for everything that is produced using these fastenings. Maybe this was a price worth paying for the jobs that have been 'saved'. But undoubtedly the finished goods manufacturers who had to bear these higher costs of fastenings will have laboured under the disadvantage of a higher input cost and a reduced competitiveness. Who can really say whether the consequent reduced production in these industries will have been less, in terms of employment, than the higher employment in the fastenings business?

Maybe I'm missing something. I am certainly no economist. Maybe the inscrutable Chinese really have a cunning plan to flood the EU with cheap screws and nails, then, when all the West Midland nail factories have gone under, suddenly increase the price of nails and bring our economy to its knees. From what I can tell, borrowing from our banks would have been a much more effective way of doing that.

Of course, the Commission, in its infinite wisdom, have seen fit to keep the proposal out of the public view. It is possible that an email to trade-ad-fasteners@ec.europa.eu requesting a copy will produce one. Why this might be possible when the document has not been posted on a website will remain a mystery to me until the day I die, I'm sure.

I contributed a couple of mini-reviews to Amazon about books that made an impact on me. You should be able to read them here and here. These links may not work - Amazon doesn't make it particularly easy to link to a particular review. I think you can probably find them via my page as a customer on Amazon.

These are both books about China. I have quite a collection, but these are among the best. I plan to write another one about 'The China Dream' by Joe Studwell, which I'm currently reading. I have learned quite a lot from travelling to China, probably more by talking to Chinese people here in the UK and in Singapore, but probably most by reading books and newspapers/the internet. I am a firm subscriber to the theory that travel narrows the mind, and that travelling once to a country more or less guarantees that the traveller will never have a deep insight into that country. I am reminded of a relative of mine who travelled to the Philippines when Ferdinand Marcos was in power. She came back from the visit with an unshakable belief in the benevolence of Ferdinand and his then wife Imelda, dismissing my comments that he was a complete kleptocrat.

I was privileged to visit Oulin on my last visit to China.

I have recently come back from a three-week trip to China. I am now busy and don't really have time to describe it in detail.

As always I learned a lot from visiting this huge country.

Beijing

I went here in the thick of the Olympic activity. Really I wish I'd never gone. The Olympics made the city amazingly expensive and difficult to get around. The hotels were 60% empty but, no doubt, had record profits. The visitors to the Olympics, as far as I could see, comprised politicians and bureaucrats, predominantly, as far as I could see.

Old Beijing really has been destroyed by the communists. There is really very little of its history left, apart from a few temples and palaces. There didn't seem to any decent museums. Maybe I just needed a better guide.

Xi'an

Xi'an was our favourite place in China. The historical sites around it are fantastic. The atmosphere needs to be cleaned up. The Olympics made their presence felt even out here as the expressway to the Qin Dynasty mausoleum (think terracotta warriors) was closed to allow some VIP convoy to travel in exclusive luxury.

Shanghai

Shanghai is a great world city, although also suffers from persistent low visibility. Superb museum - the Shanghai Museum, although some galleries were closed for restoration. Very expensive place, although not for the hotel.

Guilin

A great antidote to industrial China. A glimpse of traditional agricultural practice. Clean air and wonderful scenery. A city dominated by tourism. Very many English-speaking guides offering very good deals. I came across a great guide there, Jerry Wang. He has a number of guides working for him who speak good English, including Jenny Wang (possibly no relation) whose number is 33229259.

Hong Kong

A bit of the home counties dropped into Far Eastern Asia. Such a wonderful place. Astonishing legacy of the Brits. We should be proud.

Shenzhen, Ningbo, Guangzhou, Foshan

At the end of the family holiday I travelled around various industrial cities visiting factories and talking to the international sales departments of first class international companies. This was in many ways the most interesting part of my journey. Please see China Direct Partners for more details on what we do. I can offer UK
businesses the opportunity to source virtually anything from China, although principally products used by the construction industry. If you are interested in sourcing from China and would like us to introduce you to our manufacturing contacts in China then contact me through the website. Once you have seen the factories and talked to their owners you will have no doubt about their determination to expand their international operations. I am particularly interested in talking to UK manufacturing who might consider providing China-manufactured products on an OEM basis.

I have been very busy recently setting up China Direct Partners UK. This venture arose out of a chance meeting with Gary Dickinson whom I met when I was last in China.

The company is based around the direct global procurement business model. This involves leveraging the power of the internet and modern telecommunications, the increasing competitiveness of containerised sea freight, and the huge competitive advantage of China in large-scale manufacturing. The target sector is the building industry, the structure of which, in the UK, has remained apparantly unchanged in the face of the globalisation.

I have had great fun speaking to managers in main contractors. In many cases they say that they source entirely from the UK, which seems highly unlikely, although maybe they choose not too look too closely at where their distributors get their supplies from. I am still learning about how the industry works. I still don't know exactly what determines the decision of a main contractor to go 'management only', with all labour and materials outsourced. I would have thought that that would automatically shift too much power to the supplier in terms of preserving margins. Certainly distrubutors do make large gross margins - around 33% as far as I can tell from studying the published accounts of firms like Wolseley, although most of that saving is swallowed up through the costs which arise from managing the sourcing from a high-labour-cost economy like the UK.

I apologise for the lack of general blog entries recently. I have just been too busy.

If I know you, and you have any background in the construction sector, I would be very interested indeed in buying you a meal or a drink in exchange for picking your brains about how the sector operates.

Amazingly I have been spontaneously contacted by a couple of journalists. They wanted to interview me about investing in China.

I know a bit about this. I have spent a large part of the last year reading up about the subject, and talking to people both in China and in the UK about the subject. But as far as the other things I know about, I'm a complete novice. Compared to my (earlier) understanding about statistical mechanics, or derivatives valuation, or C++ programming, or even cooking, I know next to nothing about property investment in China.

I guess it's all relative, and that the reason that people ask me about China is that relative to others in the UK I know quite a lot. Still, I feel a complete fraud, especially when I'm asked to opine on where China ranks as an investment destination globally. What do I know I know how China compares with Czech Republic, Slovenia, Lithuania, Canada, Germany, Burma. Anyway, I'm due to appear on Anton Stoutjesdijk's website.

Anyway, I'll put up the links on the website. I'll almost certainly mention it in my Ming Wei newsletter, which I am producing fairly frequently now. If you haven't already done so, I urge you to make your way without delay to www.mingwei.co.uk and enter your email address on the panel on the left (just under the search box).

I have been very erratic in posting entries recently. I have been on holiday. Things are unlikely to improve when I am in China as I have a very full schedule of meetings.

Some of you read this but fail to monitor mingwei.co.uk, religiously or not. Some of you are known not to have signed up for the Ming Wei Newsletter. You can't avoid it that easily: here it is, reproduced in all its goriness:

Introduction

You are receiving this newsletter either because you used to be subscribed to the Herts Lettings/Ming Wei 'China list' on Constant Contact, or because you have registered an account on the Ming Wei website. If you don't think you should be receiving this then please use the unsubscribe link at the bottom or email me directly at steve@mingwei.co.uk to ask to be removed. This is not spam. Please do not report it as such and get me blacklisted! This newsletter must have made its way through your spam filter which, from my point of view, is definitely a good thing. If you have any interest in reading subsequent ones then it might be worth adding the sender to your address book, as this will reduce the chance future mailings being misclassified as spam.

The state of the Zhuhai Real Estate Market

Property prices in China generally have softened considerably in the last few months. Even China's large internal economy is not immune from the global credit crunch. Property prices in central locations in Zhuhai have stagnated over the last three or four months, and transaction volumes have plummeted. A number of estate agencies have gone out of business, and others have reduced the size of their branch network. Rental demand has weakened too, although there are still pockets of strong demand in Xiawan, especially near the New Bar Street alongside the Qianshan river.

The rail link to Guangzhou is now well underway, and should becompleted by next year. This will, for the first time, permit people tolive in Zhuhai, with its clean air, good schools and attractive seasideambience while working in Guangzhou, with its higher concentration ofmulti-national companies and executive jobs. This should have a majorimpact on demand for upmarket accommodation in the city and should helpto offset the general slowing down of the economy.

The Hong Kong and Macau property market is surging ahead, fuelled bycheap money provided by Ben Bernanke. Whereas RMB interest rates arelikely to rise to combat inflation the HK equivalent is tied to thedollar. This makes for an interesting property market in the twomarkets which have such a big influence on the Zhuhai market.

Progress on allowing foreigners to borrow to finance property purchase

I have continued to investigate ways to allow foreigners to obtain bank financing for purchases. I have made a small breakthrough, but this will be economic only for the larger investor. It requires that the investor set up a WFOE in China, so it is only for the more active and committed investor. If you are interested I can send you details. This should be available for any sort of real estate investment - commercial or residential.

Investing pension savings in China real estate

It is possible for those of you with SIPPs or SSASes to invest in China. I have been speaking to a financial advisor who knows of a way to comply with the rules on investment in real estate but still invest in overseas property. This involves setting up a investment vehicle, with around ten investors through which the investment can be made. Please call me to find out more about this opportunity.

Converting currency problems (in principle) solved

I have now solved, in principle, the problem of remitting foreign currency into China for the purpose of purchasing real estate. I am now in contact with some English-speaking lawyers who have a good knowledge of real estate law in the mainland. The whole process of property purchase in Zhuhai should now be straightforward. I have spoken to a number of experts on remitting investment profits out of China and they all tell me that there are really no problems doing this, as long as the audit trail for the original investment is available.

Auctions coming up in Zhuhai

There are a lot of auctions for properties coming up in Jida, along Jiuzhou Dadao, which is a major thoroughfare. These can be somewhat difficult for foreigners because of fairly onerous rules about registering to bid and depositing funds up front. However some bargains can be had, especially in a slow market, such as the one that obtains in Zhuhai now.

Thinking of buying to refurbish?

I have a number of contacts in the building trade, who can refurbish tired apartments in Zhuhai. Some of these can be rather expensive, but it is undoubtedly the case that a very well decorated 'western style' apartment commands a premium rent and - as long as it is in a central location - can be rented to one of the increasing numbers of foreigners who are coming to work in Zhuhai. There are often good returns to be made by buying properties in a good location but in a poor condition. Many buyers need to rent or occupy quickly because of cash flow constraints, and so are not interested in such properties. We can take the risk out of getting the redecoration done on time and on budget. If you buy new-build or off plan you will also find that you need to have a good interior decorator/second fix building team as most new-builds in China are just concrete shells with basic services (water, sewerage, electricity, gas) terminated in one corner.

Guide and interpreter facilities now available in Zhuhai

I am now able to arrange an English-speaking guide, with car, to showinvestors around Zhuhai. I have an office in Gong Bei, fully equippedwith internet and English-speaking staff, who can arrange accommodationand generally look after you on your visit to Zhuhai to inspectproperty. This is in partnership with a tour company that operates in Zhuhai, Hong Kong and Macau. They would be delighted to arrange a trip to local tourist attractions!

I haven't blogged here for a good while about China. I continue to take an interest, but the number of transactions I'm involved in has definitely gone down. I have invested in a few HK-listed developers and REITs, as a hedge against getting left too far behind in the direct investment market. The general view is that the market in Zhuhai is stalled, with prices static, and rental demand weak for all but the most high-end places. In my view this is just what the market needs to allow everyone to have time to think about whether they want to be in the market, and what part of the market (location, size, type, commercial/residential) they want to be in. I have a suspicion that high quality office space in good locations (Gong Bei, Jida) will give the best total return over the next few years.

I am in negotiation to rent a new office in Gong Bei. This is actually a share of an office owned by Chris Wong, (see links to his ventures at the end). This office will allow me finally to complete the setting up of my WFOE. The whole cost of this has been low, but it has run into a few problems, not least getting a physical bank reference over to Zhuhai (sending docs to China is still a problem I haven't solved: I understand the key is to send via HK) and then using my small office as a registered office for the company.

Chris is a mine of information about buying property in ZH. He obviously must have some good contacts in the real estate industry - he is about to launch a property portal! More importantly he owns a number of apartments in various locations across HK, Macau, Zhuhai, as a foreigner: since Chris is a Canadian, not a PRC or HK citizen.

Being qualified to borrow is not as hard as you might think. All that is required is a bit of Chinese lateral thinking. If you would like to know how it is done, the contact me via the Ming Wei Properties contact page.

I am trying to plan my trip next month.

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