As the Asia-Pacific Economic Cooperation summit ramps up, China is the country to watch in terms of credit markets, wealth creation and of course macroeconomic growth.
* With hopes of convincing China to raise the value of the Yuan but keep growing its export-oriented economy, Barack Obama underscored the importance of Pacific Asia in global growth. Goldman Sachs (GS, quote), Morgan Stanley (MS, quote) and the Financial Times all opine that China is in for a “soft landing.” Caterpillar (CAT, quote) and Yum! Brands (YUM, quote) have recently acquired Chinese companies, proof of China opening up to more foreign investment to foster its development.
* From the book, Red Capitalism: The Fragile Financial Foundations of China’s Extraordinary Rise, it is estmated by Carl E. Walter, the author, the 75% of China’s biggest companies are controlled by the government. This is an increase of 50% from ten years ago. While there is concerns about this truncating China’s full immersion into the global marketplace, the dim-sum bond market (debt denominated in yuan) has grown tremendously, with $25 billion sold already this year. According to an article in The Wall Street Journal by Lingling Wei, “Yuan Bond Standards Call,” this is viewed as an opportunity by financial institutions such as HSBC (HBC, quote)to “pick up quality paper at higher yields.”
* In an article in Bloomberg Businessweek, Michael Pettis, an economist with the Carnegie Endowment for Peace, projects growth in China falling to 3% annually. For the third quarter of 2011, China just posted 9.1% growth. This would be devastating to many American companies. Apple (AAPL, quote), as an example, generates 13% of its sales from China, according to Sam Stewart, head of Wasatch World Innovators Fund (WAGTX, quote), in a Money magazine interview with Laura Lallos.
* Writing in Forbes magazine, Lee Kuan Yew, former Prime Minister of Singapore, stated that, “As China and India come into their own, the landscape of the world economy will change permanently.” In Yew’s column in Forbes, Thomas Meier, Chief Executive for Asia of Julias Baer (BAER, quote) stated, “We see Asia as a key driver of new wealth, as macroeconomic growth tranlates into wealth.” US financial institutions such as Citigroup (C, quote), Bank of America (BAC, quote) and Morgan Stanley (MS, quote) have been actively pursuing wealth management opportunities in China.
* An article in Time magazine by Joe Klein, “Why China is Obama’s Real Problem,” claimed that China is “what keeps Obama up at night.” According to Klein in his Time piece, “China, however, is the country most likely to have an impact on the presidential campaign. It is the country most often mentioned, with great concern, by Americans I’ve interviewed in my travels around the U.S. They assume — accurately — that China is cheating, stealing U.S. jobs and manipulating its currency to promote exports.” Maybe, but as Beijing demonstrated with the disposition of Fannie Mae (FNM, quote) and Freddie Mac(FRE, quote), they will not take a backseat as long as Chinese capital is so critical for financing sovereign debt around the world and Washington posts $1.4 trillion annual deficits.