Emerging Markets Roundup: China

CHINESE FIRMS HEAD FOR GLOBAL EXPANSION

 

By Thomas Clouse

 

Several Chinese companies have picked up assets in overseas markets in recent weeks, with energy and raw material industries leading the way.

 

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Tiangong-1 on the launch pad

In two of the biggest deals, China’s largest oil producer Sinopec agreed to pay $2.1 billion for Canadian oil and gas company Daylight Energy and Sichuan Hanlong Group offered $1.3 billion for Australian iron-ore company Sundance Resources. In addition, Chinese wind turbine maker Xinjiang Goldwind announced plans to build a $200 million wind farm in the US state of Illinois. Chinese e-commerce company Alibaba has also expressed interest in buying US internet portal Yahoo.

 

The International Monetary Fund lowered China’s 2011 and 2012 growth estimates in September by 0.1% and 0.5% respectively, compared to its previous estimates in June, citing monetary tightening and weaker external demand. It recommended further interest rate liberalization and exchange rate flexibility to stimulate domestic consumption. Despite the lower estimates, the IMF still expects China to grow 9.5% and 9.0% in 2011 and 2012. The IMF report is not the only recent indicator of slowing growth. HSBC’s purchasing managers’ index (PMI) showed a reduction in manufacturing activity in September for the third month in a row.

 

US-listed Chinese companies stock prices fell after media reports indicated that the US Department of Justice is investigating possible fraud charges against some foreign companies listed on US exchanges. The reports cited comments from a Securities and Exchange Commission official, which began its own investigation earlier this year.However, the efforts of the SEC and DOJ could be frustrated by difficulties in obtaining information from within China’s borders.

 

China successfully launched its first space laboratory module, Tiangong 1 or Heavenly Palace 1, into orbit on September 29—taking a step towards its goal of having a manned space station in the next decade.

 

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