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As the export and investment went through slowdown simultaneously and the Chinese stock market was hit by various scandals, it is better to recommend the investment managers to pack themselves for a long summer holiday.
However, if this bad news can force relevant Chinese government departments to take some reform which should happen earlier more seriously. The good turning might be anticipated. For example, the telecommunication administra- tors of China published a document at the end of June, which includes eight new reform measures to encourage private investors’ involvement into the telecommunication.
Previously there were many discussions about the reform to the industries dominated by the Chinese government, but none of the results from the discussion were fully implemented. This time, things might turn out to be different.
At first, there is a more impendent need for shifting to the domestic demand-oriented eco- nomic growth, thanks to the decreasing return brought by the old model oriented by export and fixed assets investment.
Meanwhile, it is not very likely to maintain the economic growth rate with a huge amount of capital like before.
In the past three or four years, Chinese domestic companies collectively went public in different stock exchange markets in the world. Presently, the way of raising funds through going public is not accessible for most, if not all, of Chinese companies.
Meanwhile, Chinese banks will find it difficult to solve the capital shortage caused by domestic enterprises’ inability to go public to raise funds. Analysts said that the Chinese state-owned banks provided capital for the massive credit after the outbreak of financial crisis caused by the collapse of Lehman Brothers. But this time they can not be that generous.
The latest report of Fitch Ratings showed that Chinese domestic banks no longer had the deposit cushion. It is hard for them to lend a large amount of new loans. One of the reasons is that enterprises saved no new deposits into banks in the past 18 months.
In that condition, foreign capital should be more welcome, but China met the turning of flow in the foreign capital as the data published in May shows that the FDI of this country has been dropping for six straight months.
The government thus published some new measures to encourage foreign investment, seemingly to deal with this problem.
The government recently increased the investment quota for the Qualified Foreign Institutional Investors, or simply called QFII. However, this change may not bring the wave of panic buying due to the underperformance of domestic stock market and the extra difficulties in the process of trading Chinese domestic stocks with the RMB that cannot be fully freely exchanged.
Therefore, other measures are needed. The relaxed supervision in telecommunication might inspire foreign companies though the plan has not been implemented. It is because the telecommunication industry is a section with fast growth and advanced technology in the Chinese economy. Thus it is almost monopolized by stateowned enterprises.
Theoretically, foreign investors were given wide channels to get into the telecommunication industry of China after it joined in the World Trade Organization ten years ago, but the industry is still taken by the government.
The Ministry of Industry and Information Technology (MIIT) listed the eight sections that might be open to private capital in the coming reform.
As Nomura pointed out, three of these eight sections for the first time saw the eased regulation: private companies are allowed to resell telecommunication services as mobile virtue network operators; the regulation over fixed cable access is eased to boost the development of broadband; and the restriction for private capital to invest into the Internet data center is eased as well.
The MIIT also pointed out that the fundamental telecommunication operators were encouraged to go public within the boundaries of China and private telecommunication companies were encouraged to expand the overseas market.
Though China has the largest number of mobile phone users in China, two thirds of its 1 billion mobile phone users subscribed to the service of China Mobile. Thus the space for intensifying the competition must exist.
The telecommunication market in India is much different from China. In recent years, the number of mobile phone users in India is growing at a faster pace than China and now this country has over 950 million mobile phone users, who are recruited by five mobile operators including foreign companies. These operators are furiously competing with each other in the Indian market.
Then it is not surprising that Indian mobile phone users can get cheaper services. The income from each user of the Indian mobile operators is decreased to 2-3 U.S. dollars every month while the figure in China is around 10 U.S. dollars.
Eventually, the price of protecting the stateowned giants like China Telecom is to make Chinese consumers pay for higher prices and to cause China to miss investment and employment opportunities.
People could easily doubt whether China could dance to another tune to allow foreign and private investors to bring more competition, but it can be said that the Chinese economy really needs a new engine for growth that is to be formed through relaxed regulation.
If the Chinese government takes it for granted when it comes to the rebalance of economy and the promotion of domestic consumption, the telecommunication industry is an obvious breakthrough point.
In the other fields where foreign investors are granted with more freedom in operating, such as the retail business, the investment is always active.
A columnist for MarketWatch highlighted how Nike, Adidas and P&G increased their investment in China for their expansion into the second- and third-tier cities. This puts their Chinese rivals into a harder situation but Chinese domestic consumers are given more choices of consumption which will generally boost their consumption will.
Others that can benefit from the economic slowdown and tight credit of China are those who can provide capital for enterprises in great need of capital.
A few proofs show that PE funds in Hong Kong is still enjoying good performance as one of the few accessible financing channels.
However, if this bad news can force relevant Chinese government departments to take some reform which should happen earlier more seriously. The good turning might be anticipated. For example, the telecommunication administra- tors of China published a document at the end of June, which includes eight new reform measures to encourage private investors’ involvement into the telecommunication.
Previously there were many discussions about the reform to the industries dominated by the Chinese government, but none of the results from the discussion were fully implemented. This time, things might turn out to be different.
At first, there is a more impendent need for shifting to the domestic demand-oriented eco- nomic growth, thanks to the decreasing return brought by the old model oriented by export and fixed assets investment.
Meanwhile, it is not very likely to maintain the economic growth rate with a huge amount of capital like before.
In the past three or four years, Chinese domestic companies collectively went public in different stock exchange markets in the world. Presently, the way of raising funds through going public is not accessible for most, if not all, of Chinese companies.
Meanwhile, Chinese banks will find it difficult to solve the capital shortage caused by domestic enterprises’ inability to go public to raise funds. Analysts said that the Chinese state-owned banks provided capital for the massive credit after the outbreak of financial crisis caused by the collapse of Lehman Brothers. But this time they can not be that generous.
The latest report of Fitch Ratings showed that Chinese domestic banks no longer had the deposit cushion. It is hard for them to lend a large amount of new loans. One of the reasons is that enterprises saved no new deposits into banks in the past 18 months.
In that condition, foreign capital should be more welcome, but China met the turning of flow in the foreign capital as the data published in May shows that the FDI of this country has been dropping for six straight months.
The government thus published some new measures to encourage foreign investment, seemingly to deal with this problem.
The government recently increased the investment quota for the Qualified Foreign Institutional Investors, or simply called QFII. However, this change may not bring the wave of panic buying due to the underperformance of domestic stock market and the extra difficulties in the process of trading Chinese domestic stocks with the RMB that cannot be fully freely exchanged.
Therefore, other measures are needed. The relaxed supervision in telecommunication might inspire foreign companies though the plan has not been implemented. It is because the telecommunication industry is a section with fast growth and advanced technology in the Chinese economy. Thus it is almost monopolized by stateowned enterprises.
Theoretically, foreign investors were given wide channels to get into the telecommunication industry of China after it joined in the World Trade Organization ten years ago, but the industry is still taken by the government.
The Ministry of Industry and Information Technology (MIIT) listed the eight sections that might be open to private capital in the coming reform.
As Nomura pointed out, three of these eight sections for the first time saw the eased regulation: private companies are allowed to resell telecommunication services as mobile virtue network operators; the regulation over fixed cable access is eased to boost the development of broadband; and the restriction for private capital to invest into the Internet data center is eased as well.
The MIIT also pointed out that the fundamental telecommunication operators were encouraged to go public within the boundaries of China and private telecommunication companies were encouraged to expand the overseas market.
Though China has the largest number of mobile phone users in China, two thirds of its 1 billion mobile phone users subscribed to the service of China Mobile. Thus the space for intensifying the competition must exist.
The telecommunication market in India is much different from China. In recent years, the number of mobile phone users in India is growing at a faster pace than China and now this country has over 950 million mobile phone users, who are recruited by five mobile operators including foreign companies. These operators are furiously competing with each other in the Indian market.
Then it is not surprising that Indian mobile phone users can get cheaper services. The income from each user of the Indian mobile operators is decreased to 2-3 U.S. dollars every month while the figure in China is around 10 U.S. dollars.
Eventually, the price of protecting the stateowned giants like China Telecom is to make Chinese consumers pay for higher prices and to cause China to miss investment and employment opportunities.
People could easily doubt whether China could dance to another tune to allow foreign and private investors to bring more competition, but it can be said that the Chinese economy really needs a new engine for growth that is to be formed through relaxed regulation.
If the Chinese government takes it for granted when it comes to the rebalance of economy and the promotion of domestic consumption, the telecommunication industry is an obvious breakthrough point.
In the other fields where foreign investors are granted with more freedom in operating, such as the retail business, the investment is always active.
A columnist for MarketWatch highlighted how Nike, Adidas and P&G increased their investment in China for their expansion into the second- and third-tier cities. This puts their Chinese rivals into a harder situation but Chinese domestic consumers are given more choices of consumption which will generally boost their consumption will.
Others that can benefit from the economic slowdown and tight credit of China are those who can provide capital for enterprises in great need of capital.
A few proofs show that PE funds in Hong Kong is still enjoying good performance as one of the few accessible financing channels.