All roads lead to Asia for the great and the good
ASIA BRIEFING:OVER THE next few months, a squadron of senior Irish politicians and business leaders will descend on Asia, eager to convince the largest continent’s still cash-rich taipans and cadres that Ireland is the venue of choice for the smart Asian investor.
The biggest name making the trip is Taoiseach Enda Kenny, who will arrive in China at the end of March for a visit which was announced during the ground-breaking trip to Ireland by China’s leader-in-waiting, Xi Jinping, and which will aim to build on the progress made during that visit.
You can expect him to bring a muscular trade delegation with him to transform the goodwill generated by the visit into contracts, trade deals and memorandums of understanding.
Meanwhile, Minister of State for Training and Skills Ciaran Cannon will be in China for St Patrick’s Day, trying to unlock the Chinese education market, which is hungry for both training and skills. Education is valued more highly in China than any other resource, and the potential market is enormous. It is also one that should start to yield even greater benefits now that the universities and colleges are working in a co-ordinated way to build in the China market.
Minister for Public Expenditure and Reform Brendan Howlin will be in Singapore, home to some of the more influential Irish expatriates in Asia (they tend to work for multinationals in the city state). Singapore’s success model has something to teach Ireland, particularly in areas where Ireland excels, such as biotech and IT.
In coming months, Minister for Agriculture, Food and the Marine Simon Coveney is also expected to make the trip to China. China has more than 20 per cent of the world’s population – the highest number globally – but only 7 per cent of it is arable land. What agricultural areas it has are threatened, leaving the government fearful of its ability to feed its population of more than 1.3 billion.
All of which is a great opportunity for Ireland’s food and agribusiness sector. Tánaiste and Minister for Foreign Affairs Eamon Gilmore is also due to visit China this year, as flagged during the Xi Jinping visit.
With such an influx of Ireland’s great and good coming here, the Irish Exporters’ Association is also keen to help efforts to boost trade with Asia and has just launched its promotional plan for this year, called Expanding Trade with Asia Key to Export and Job Growth over Next Decade – Now is the Time for Action.
Colin Lawlor, who chairs the Asia Trade Forum, said the statement of intent to invest in Ireland was the most significant outcome of the Xi Jinping visit. “China has become a very large investor in overseas markets, with investments of $220 billion in the period 2006-2010. However, only some very small investments have been made in Ireland by Chinese companies,” he said.
“We can and must do better. Vice-President Xi outlined plans to increase these investments significantly over the next decade and Ireland has to do much more to win these opportunities. We are committed to doing our part to make it happen,” he added.
Half of the world’s six billion mobile phones are in the Asia-Pacific region. Asia currently accounts for 26 per cent of nominal global gross domestic product, a figure that is set to rise to 45 per cent by 2030, while consumer spending will see Asia overtake the US before the end of the current decade.
The focus of the exporters’ forum is to encourage businesses to see the opportunities and expand in at least one Asian market. It plans to do this by offering practical support and advice on how to access those markets through a series of programmes and events, focusing mainly on China, India, Japan, Malaysia and the Republic of Korea.
The association hopes to include a trade mission to India, a rapidly developing country with an enormous market that often gets lost in the jet-trails left by China’s rise, but which in many ways has a lot to offer to Irish companies, given its English-language abilities and its more familiar rule of law.
“Over the last few years, we have seen increased workflow between Asia and Ireland from an inward investment and an exporting viewpoint, and the focused effort of this forum, I believe, will result in increased business activity,” said David Carthy, a partner in William Fry’s foreign direct investment group, at the launch of the plan in Dublin.
Patrick Burke, a partner in Grant Thornton, pointed out how all four Bric countries (Brazil, Russia, India and China) are set to be G7 members by 2020, with Britain and France exiting. A good time for the Irish squadrons to head for Asia then.
China's cigarette industry firing on all cylinders
SO, NAME the industry in China that appears to be more profitable than the Hong Kong and Shanghai Bank (HSBC) or Wal-Mart, and which racked up sales growth of 16.7 per cent in the first half of 2010 (the most recent figures available).
Despite (often somewhat weak) attempts to ban smoking in public places, and growing health awareness in China, China National Tobacco, the nation’s cigarette monopoly, had net income of 117.7 billion yuan (€14 billion) in 2010, on sales of 770.4 billion yuan (€92 billion).
The figures were released recently by Industrial Bank because China National Tobacco is in the process of buying a €600 million stake in the bank.
Smoking may be turning into a niche hobby for people shivering outside pubs in Ireland, but the situation is different in China, where people still like to give a carton of cigarettes as a present at weddings or funerals.
Based on the 2010 data, China National Tobacco is the world’s 18th largest company by profit, Bloomberg reckons, just behind JPMorgan Chase Co.
The earnings are higher than Sinopec, China’s oil monopoly, and the Bank of China and, by sales, China National Tobacco is the largest single manufacturer of tobacco products in the world.
Smoking is not as prevalent as it was in China, but it still looks like a national pastime when you get away from the eastern seaboard and south of the country and into the hinterland. There are more than 350 million smokers in China. Three-fifths of males smoke and the amount of cigarettes sold is expected to rise by 14 per cent a year until 2015.
The World Health Organisation reckons that around one million Chinese die of tobacco-related illnesses every year.
The government has tried to implement a ban on smoking in public places, but it is hard to turn away €72 billion in tax revenues.
Chinese Congress applauds growth forecast - even though it's too low
FOR YIELDING useful clues as to what is really going on with the Chinese economy, the annual parliament – the National People’s Congress – is priceless, and this year’s event was no exception. Many analysts have problems with the way statistics are gathered in China but, in the absence of any other indicators, they have to deal with them as best they can.
Economic forecasts are a classic example. This year, premier Wen Jiabao told the gathered delegates in the Great Hall of the People that he was setting China’s economic growth target at 7.5 per cent for 2012, the first time in eight years that it has been less than 8 per cent.
He spoke of a “tortuous” road to global economic recovery, and said how difficult it had become to “solve institutional and structural problems and alleviate the problem of unbalanced, uncoordinated and unsustainable development”. The 3,000-odd delegates applauded with vigour at the end, but most will have discounted what the premier said about economic growth because everyone knows the figure will be eight per cent or higher this year.
In China, economic forecasts are dictated by political need. The government’s primary concern is maintaining stability and, faced with a need to rein in a swelling property bubble and wrestling with inflationary pressures, it needs to dampen expectations, certainly for the next few months. What better way to do that than to set a relatively modest growth target for the year?
First off, 7.5 per cent GDP growth is the kind of figure that most European economies have only as a dim memory – certainly it is something the Irish Government can only dream of, and never would it consider it a modest target either. The Chinese government can do this because there is little transparency about how data is collected, and the individual provinces are aware of the need to fit into the broader plan of the central government when it comes to issuing statistics.
News that China’s trade balance plunged €24 billion into the red in February as imports swamped exports (the largest deficit in at least a decade) will also have helped stop any irrational exuberance.
In the last year, domestic consumption improved considerably and has done much to offset the decline in the export markets. Most private sector analysts are upbeat on the prospects for 8 per cent plus, and that is why the delegates at the NPC were able to clap energetically, even though the targets have been lowered.
Political and economic realities do not always tally.