Beyond Borders, Global Domination – An eye on China

Contributed by: Kunal Sabnis, CFA

Mumbai chapter of IAIP hosted Kevin Gin, CFA, Director, Alpha Capital Pte Ltd for the event Beyond Borders, Global Domination – An eye on China on 30th Jan 2015. Kevin’s career profile boasts of SVP with Singapore Exchange Ltd., Chief Operating Officer of CITIC Frontier China Research, Director of Kleinwort Benson Securities Asia, Head of Regional Property and Singapore Country research. Kevin started with a perspective of China’s growth push in 80s and 90s which transformed Shanghai from a village in 1995 into a financial hub. China is very diverse and made up of different provinces and should not be looked and researched as one country. It is very similar to how India is made up with different cultures and traditions.

China’s consistent and unparallel growth led to the demand of robust internal governance systems. This followed anti corruption drive, checking abuse by the people in power and unified policy. In the last decade China has been striving towards balanced growth to bridge the stark urban rural divide. China’s 5 year plans for growth and development have been extremely effective and today focus on energy conservation, biotech, renewable energy, high-tech equipment manufacturing and alternative energy vehicles.

He mentioned that China’s aggression in the recent past has been resource driven rather than political or land mass expansion. But this aggression has led to China being portrayed as a devil but the main intent is to facilitate trade. China trades across the globe and dominates most of the manufacturing sectors.  Electronics and Furniture exports contributes maximum to its exports. Kevin feels that many people outside China are unaware of the extent of Chinese internal trade. China today has 6-7 large home grown auto brands such as Brilliance, Saic, DFM, Chery etc. It has big energy companies including companies focusing on solar power. Industrial and Commercial Bank of China is the largest bank in the world in terms of assets. Wanda the largest real estate group in China bought AMC theatres in US which is the largest movie distribution company in the US.  

Home growth Chinese internet companies such as Alibaba, Baidu, Tencent have also been aggressive in growing internally as well as acquiring strategic assets overseas. But the future of China is not the internet but mobile and most of the investments are directed there. Chinese GDP growth is better correlated with the growth of technology companies rather than to the stock market.

As China and India would be high growth markets in the near future and companies which are world leaders in their specific sectors have to invest in these emerging markets in order to maintain their leadership position. China due to its one child policy will get old before it gets rich. 7 million graduates pass out each year in China and Chinese GDP growth should be above 7% to ensure employment to them. This could lead to Renminbi being devalued in order to push growth. Being the second largest economy in the world and with dominance in many industrial sectors, Kevin feels that China can force Renminbi to be the reserve currency of the world much the USD today.  

With regards to India, Kevin thinks that India has a great demographics and it should look more inward for growth rather than outside.

– KS