Financial Services Talking Points, 17-03-2016


China’s Consumer Driving Costs

Shanghai has just taken 11th place in a new worldwide cost of living survey released by the Economist Intelligence Unit last week. It’s currently ranked highest amongst all Mainland China cities and is head-to-head with Tokyo, making it one the eight Chinese cities included in the top 60. Results like this indicate a Chinese premium price for goods, while other figures point to average working class spending sitting at $7 per day. Not only does this illustrate the vast disparity between China’s consumers, but it also highlights the dangers of analysing data of this scale. 50% of China’s 770.4 million strong workforce live in the rural areas, and even when they travel to the big cities like Shanghai or Beijing their cost of living doesn’t go up despite being in the top tier living cost zones. So why is this? It comes down to the contrasting lifestyle of the different working classes in these cities. The white collar workers spend big money on lunches, coffees, imported food goods and social events despite having low to medium salaries, whereas most migrant workers get food and accommodation provided and buy from local markets and food vendors. This highlights the significance of foreign businesses exporting niche products and services to China – because despite a majority of consumers unable to afford niche products, those that do number high in global terms and have significant spending capacity. Click here to read the full article.


Continued growth for China’s service outsourcing

The Ministry of Commerce has said that despite economic headwinds for the first two months of the year, China’s service outsourcing industry has continued to grow. 16.92 billion US dollars worth of service outsourcing contracts have been locked in, up 7.5 percent year on year. Offshore service outsourcing contracts made up 11.64 billion US dollars (75.54 billion yuan) of this figure, climbing by 28.5 percent year on year. Outsourcing of information-technology related contracts accounted for 51 percent of total projects, and regions falling within the Yangtze River economic ‘belt’ were up by 12.2 percent year on year. Click here to read the full article.


Bank aims to raise US$1.5b from IPO

China Zheshang Bank has stated that it will be looking to raise $1.5b US dollars from IPO in Hong Kong. The Hangzhou based firm started offering 3.3 billion shares at 3.92 creeping to 4.12 Hong Kong dollars on Wednesday 16th March. The firm’s net worth in 2015 has an estimated total assets of 154 Billion US dollars with a massive 128 branches across China. This IPO is the largest in Hong Kong since the US$1.9b listing from China Energy Engineering Corp. On March the 30th the bank will be officially listed on the Hong Kong Stock Exchange. US$1.1b is speculated to be brought by the Alilba group and Zheijiang group. Due to the continued economic growth of east Asia Hong Kong is now being seen as the prime candidate for listing IPOs, bypassing both NYSE and LSE. Click here to read the full article.


UK investment in China up by 120%

Recent statistics from The Ministry of Commerce showed FDI (Foreign Direct investment) grew 2.7 % from last year, following an injection of US$22.5 billion in the months of January and February. FDI was highest from the US, Singapore and lead by the UK with 120%. Lian Ping (Chief economist at Bank of communications) stated “It is thanks to the government’s candid attitude and straightforward explanation of the country’s economic slowdown as well as its efforts of sustaining the growth momentum.” Fears were widespread when China’s GDP contracted at the end of last year with a rate of 6.9%, which was the weakest in the last 25 years. However as China opens itself up to foreign investment through law and policy changes, lowering the entry barrier, high tech firms and service industries are leaping at opportunities for growth in China. Click here to read the full article.