The ‘China Rising’ literary genre sells a lot of business books, especially in airports. You will be familiar with many of the themes – that the global axis is tilting inexorably to the east, that Mandarin is our future commercial lingua franca and that we have all left the ‘American Century’ and are now well into the ‘Pacific’ one.
Of course, WiC believes that China’s emergence is more than relevant to us all. It’s why we hope you will read our weekly publication.
But we know too that the picture is more nuanced than some of the more excitable commentary suggests. As do many of the Chinese themselves; a lengthy feature in this month’s Southern Weekly is a case in point. It laments the “retreat” of Chinese businesses overseas, rather than laud its imminent triumph.
While many regard the international financial crisis as China’s great opportunity to seize control of foreign assets at bargain prices, the Weekly is saying something rather different. It reckons 2008 was actually a disastrous year for Chinese businesses abroad – which it reports made an estimated $1.2 trillion of combined losses.
Southern Weekly is referring to the 2008 World Chinese Entrepreneurs Development Report, and its concern is not with the high profile activities of state-owned companies.
Instead, it is talking about the “three knives” economy of the ethnic Chinese diaspora. With its beginnings in low-tech employment with “scissor, kitchen knife and razor”, China’s overseas entrepreneurs have since branched out into a range of industries and geographies. And the international financial crisis is hitting them hard.Exact numbers are hard to come by, as most of these businesses are privately owned (and probably not on the tax register either). But the report thinks that the value of assets owned by ethnic Chinese (the massive majority of which are still concentrated in Asia) has decreased by at least a third.
It even has a “farewell index” to rate the countries from which the retreat has been greatest. Nigeria, the Congo, Russia and Dubai take the dubious honours, albeit for different reasons.
In Dubai, the bursting of the property bubble has bashed the 10,000-plus Chinese real estate speculators, and the 100,000 strong Chinese construction force. In the Congo, 90% of the Chinese copper and cobalt mines have been shuttered. Timber and trading businesses in Russia – on the borders with Manchuria – have been closing in droves, and Chinese traders in Nigerian cities have been giving up and flying home.
This is having an impact in Chinese towns and cities, like Qingtian County in northwest Zhejiang. Although an area of only a few square kilometres, Qingtian has grown used to 70% of its population (or 230,000 people) working overseas. The town’s better hotels, once filled with visiting relatives from overseas – “speaking languages difficult to understand but with a deep love for Italian espresso” – lack their usual buzz. Few of the lights are on at the new high-end residence Fragrance Garden, the newspaper reports, as plunging remittances from overseas have punctured the local property market.
The overseas retreat fits poorly with theories of ‘China Rising’. But it is a practical result of the global downturn. As the Southern Weekly points out “when the cow runs out of milk,” Chinese people will dispense with it and go home.
Keeping Track: In WiC11 we looked at how Chinese firms were retreating from lossmaking overseas ventures. More
evidence just in from the China Council for the Promotion of International Trade. Its poll of 1,100 firms found that 85% said their overseas businesses had been negatively impacted by the crisis, and only 7% will invest overseas this year.(30 April 2009)
© ChinTell Ltd. All rights reserved.
Exclusively sponsored by HSBC.
The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.