China Sourcing Blogs Roundup-20/11/07

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As an example of its call for firms to look beyond the city limits of Shanghai, Beijing and Guangzhou and to explore the opportunities of cities like Wuhan, Chengdu, Xi’an and Xiamen, All roads lead to China today commended U.S. hedge fund Chilton Investment for its plans to establish an office in Western China, as reported in China Daily.

all I can say is that its about time…Many PE/VC funds have shied away from believing that the best deals are here. The problem is that for firms in Shanghai, there is a tour that everyone makes and with so much attention, so much ‘love,’ that expected valuations are off the chart… Hopefully we are entering a time where opportunities in the West are given more consideration.  

The China Briefing Blog on Thursday reported on the confusion and uncertainty caused in the real estate sector by new guidelines for FDI. A new catalogue for foreign investment aimed to limit investment in industries not perceived by Beijing as problem areas seemed effectively to have terminated foreign investment in the real estate industry. Where the 2004 catalogue classified foreign investment in new residential developments as ‘encouraged,’ it is now absent, while foreign investment in property brokerages and agencies are now listed in the ‘restricted’ category. One sector where foreign investors will enjoy significant encouragement in the new catalogue, however, is high-tech industry.    

Michael Pettis in China Financial Markets yesterday commented on the recent flurry of Chinese acquisition plans abroad. While several Chinese companies listed on the Shanghai and Shenzhen markets can use their expensive share prices to make foreign acquisitions, the problem is that their currency, like the RMB itself, has limited value abroad. In addition, they are hamstrung by the restrictions on foreign ownership which mean they cannot exchange their shares for foreign holdings, and they also cannot raise enough cash directly, making it very difficult to buy foreign-listed shares.   

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