Peter Fuhrman, Chairman & CEO of China First Capital, who will be speaking at this year's SuperReturn Asia conference, shares his latest proprietary research report with us which, focuses on the recent economic transformation of China and the current state of its business development.

Peter will be speaking on China Growth on Tuesday 22nd September and participating in the Champagne Discussion Roundtable Group on the same day, discussing the topic The Unclaimed Pot Of Gold At The End Of China’s PE Rainbow.

SuperReturn Asia takes place 21-24 September 2015, JW Marriott, Hong Kong.
Fuhrman

 

China 2015 — China's Shifting Landscape - China First Capital new research report published

Slowing growth and a gyrating stock market are the two most obvious sources of turbulence in China at the midway point of 2015. Less noticed, perhaps, but certainly no less important for China’s long-term development are deeper trends radically reshaping the overall business environment. Among these are a steady erosion in margins and competitiveness in many, if not most, of China’s industrial and service economy. There are few sectors and few companies that are enjoying growth and profit expansion to match last year and the years before.

China First Capital's new proprietary research report, “China 2015 — China’s Shifting Landscape”, goes behind the headlines and current ructions to illuminate some less-seen, but relevant, aspects of China’s changing business and investment environment. To download a copy click here.

China’s consumer market, while healthy overall, is also becoming a more difficult place for businesses to earn decent returns. Relentless competition is one part. As problematic are rising costs and inefficient poorly-evolved management systems.  From a producer economy dominated by large SOEs, China is shifting fast to one where consumers enjoy vastly more choice, more pricing leverage and more opportunities to buy better and buy cheaper. Online shopping is one helpful factor, since it allows Chinese to escape from the poor service and high prices that characterize so much of the traditional bricks-and-mortar retail sector. It’s hard to find anything positive to say about either the current state or future prospects for China’s “offline economy”.

Meanwhile, more Chinese are taking their spending money elsewhere, traveling and buying abroad in record numbers. They have the money to buy premium products, both at home and abroad. But, too much of what’s made and sold within China, belongs to an earlier age. Too many domestic Chinese companies are left manufacturing products no longer quite meet current demands. Adapting and changing is difficult because so many companies gorged themselves previously on bank loans. Declining margins mean that debt service every year swallows up more and more available cash flow. When the economy was still purring along, it was easier for companies and their banks to pretend debt levels were manageable. In 2015, across much of the industrial economy, the strained position of many corporate borrowers has become brutally obvious.

Inside the new China First Capital report, you will not find much discussion of GDP growth or the stock market. For those interested in the stock market’s current woes, China First Capital's chairman and founder Peter Fuhrman recommends this article (click here) published in The New York Times, with a good summary of how and why the Chinese stock market arrived at its current difficult state.

Among the topics analyzed in “China 2015 — China’s Shifting Landscape” are:

1. China’s most successful cross-border M&A ever, General Mills of the USA acquisition and development of dumpling brand Wanchai Ferry (湾仔码头), using a strategy also favored by Nestle in China
2. China’s new rules and rationale for domestic M&A – “buy first and pay later”
3. China’s most successful, if little known, recent start-up, mobile phone brand OnePlus – in its first full year of operations, 2015 worldwide revenues should reach $1 billion, while redefining positively the way Chinese brand manufacturers are viewed in the US and Europe
4. Shale gas – by shutting out most private sector investment, will China fail to create conditions to exploit the vast reserves, larger than America’s, buried under its soil?
5. Nanjing – left behind during the early years of Chinese economic reform and development, it is emerging as a core of China’s “inland economy”, linking prosperous Jiangsu and Shanghai with less developed heavily-populated Hubei, Anhui, Sichuan

Says China First Capital chairman Fuhrman, "We’re at a fascinating moment in China’s story of 35 years of rapid and remarkable economic transformation. The report’s conclusion: for businesses and investors both global and China-based, it will take ever more insight, guts and focus to outsmart the competition and succeed."



Find out more about what Peter Fuhrman will be discussing at his Champagne Discussion Roundtable Group on Tuesday 22nd September, The Unclaimed Pot of Gold at the End of China's PE Rainbow, by reading his report on China Debt Investing.