Happy & Prosperous New Year

Chinese Wealth is on the Move

Chinese Real Estate

In the period from July 2014 through June 2015 approximately $590 billion moved out of China according to Fitch Ratings.  A good portion of that money, $28.6 billion, made its way into US real estate where the Chinese pay more than twice what they pay in other countries for homes.  Sixty-nine percent of the time they pay in cash and they really like to buy in California.

An interesting driver for real estate purchasing, beyond the relatively stable, safe US economy, is that Chinese property rights are limited to 70 years making the permanency of US ownership appealing.  Source: New York Times

General Motor’s brings the East to the West

Buick envision

GM is bringing a Chinese manufactured car to the States.  The Buick Envision is a compact sport-utility vehicle that has sold 120,000 units in China since its introduction last year.  The decision to bring the car to the US from China comes at a time when the brand’s US sedan sales are down in a world of S.U.V.’s and crossovers.  The Envision slots into a void in the Buick lineup.  Before any importing begins, the company is looking at product changes required by the US market.  Source: New York Times

Essentially Flat

Economic Index - Oct2015

China’s Leading Economic Index is based on a collection of eight indicators that together give a broad view of the Chinese economy. The movement from September to October is essentially flat and in the same range as we saw back in February and March of this year.  To put current numbers in perspective, the average over the 25 years since 1991 has been 102, meaning that the Index has been running below average for the last 13-months.  That reflects the challenges the massive adjustment from a government investment economy to consumer economy is putting on the country.  Source: Trading Economics; National Bureau of Statistics, China

Happy Holiday

Alibaba Pictures Eyes Paramount Pictures


Last year Jack Ma, Alibaba’s chief, did two things that suggest his strategy in the film industry. After the company’s IPO hit it big in the US, he and some of his key associates visited Hollywood for meetings with broad range of people.  Then the company established the Hong Kong-based Alibaba Pictures, which invested in Tom Cruise’s Mission Impossible – Rogue Nation.  With that backdrop, hearing there is a possibility that Alibaba may buy a stake in Paramount Pictures is not surprising.

Jin Di, an analyst with Forrester Research, noted that, “The movie industry will provide Alibaba with more data to know what consumers are viewing, what devices they’re using and how much time they spend online…a complete view of a customer at any given phase of their purchasing journey.”  Source: South China Morning Post.

Expect 800 Million Smartphone Subscribers by Year’s End

Carrier Data - November 2015

As of November, 60% of all mobile subscriptions are for advertising-ready 3G/4G devices and at a run-rate of 17+ million new smart device subscribers per month, we will cross the 800 million mark by the end of 2015. That means a staggering 200,000,000 new smart subscribers have been gained since the beginning of 2015 – a 33.3% increase in one year.  Expectations for 2016 are that growth will continue, but at a slower rate.  Still, we should reach 900 million before 2016.  Sources: China Mobile, China Unicom, China Telecom.

Chinese Consumer Sentiment Rebounds

Consumer Sentiment1115

The 13-month average for consumer sentiment is 112.9.  November’s number jumps ahead of the average after October, which recorded the lowest consumer sentiment of the year.  A speculative explanation for the strong rebound may be a positive feeling generated by Single’s Day excitement…or not.  We’ll see how it plays out when December’s numbers are available.  Source: The Westpac MNI China Consumer Sentiment

Jobs by the Millions and Sales in the Billions

eComm v Retail in china

China’s e-commerce boom is providing jobs by the millions and sales in the billions. And it is only a small percentage of total retail sales, implying that there is still growth in them there hills.  Interestingly, a recent study by Bain & Company estimated the about 40% of e-commerce sales cannibalized sales from bricks and mortar stores.  That means 60% of e-commerce sales are new, the kind that expand the market, the kind that broaden the consumer economy goals of the Chinese government.  It also means the new emphasis on lower-tier cities by both Alibaba and their competitor, JD.com, is paying off.  They are drawing money out of areas were the consumer economy has lagged.  Source: South China Morning Post

Cars in China

Ford - VW

Ford chief executive Mark Fields has big plans for China and for electric cars.  In explaining his plan, he says, “By 2020 we will offer customers in China a range of hybrid, plug-in hybrid and full electric vehicles.”  To back up the statement Ford will be investing $1.8 billion in Chinese R&D over the next five years.  The hope is that the company will move up on the other foreign car makers General Motors, Volkswagen, Hyundai Motor Co and Nissan Motor Co. that lead them today.

In November the company took a nice step toward the goal by selling 106,283 cars, a 9% increase over November 2014.  They should cross the 1 million unit line by the end of the year.

Speaking of VW, China’s number two foreign car maker, though they are reeling from their emissions scandal that is affecting sales all over the world, including China, they remain optimistic about the opportunity there.  They are focused on lower-tier cities where the middle class is growing and car ownership is sallow.   Source: Business Insider; Detroit Free Press