China has become Germa ny’s largest foreign inves tor for three straight years

Yang Qingyuan， representative of china-germany Economic Joint Association said that 158 new foreign projects established in Germany came from China， making this country an important source of foreign investment for Germany. In the following two years， Chinese enterprises created new records in the number of invested projects in China.

He said： “the situation will keep improving in the following years.”

Before his speech， Chinese president Xi Jinping paid a visit to Germany. During his journey the two countries published the Joint Announcement of Building China-Germany All-round Strategic Partnership， along with which they reached 18 economic and strategic agreements. Germany lists China as one of the six most important exports destinations in 2014. China is now the fifth largest exports markets for Germany with the annual imports of 70 billion euros.

The industrial transformation and upgrade of China have a great need for the high-precision machines imported from Germany.

According to Yang Qingyuan， the industrial domain is the most intriguing part of Germany for Chinese investors. Most of the M&As by Chinese enterprises happened in the fields of industrial materials， which Germany has traditional advantages in. For example， at the beginning of 2012， Sany Heavy Industry spent 2.6 billion yuan acquiring German machine company Putzmeister. In the same year， Shandong Heavy Industry finished the strategic restructuring with Kion Group.

According to the information available on the website of China’s embassy in China， the non-financial investment from China into Germany approved by China’s Ministry of Commerce had amounted to US$3.13 billion by the end of 2012.

Wang Qian， a commissioner at the China-Germany Economic Joint Association， said that the Chinese enterprises that invest in Germany are intrigued by the technologies from Germany and European market. Chinese enterprises chose to invest in Germany because it is good for their long-term development and globalization.

Earnest & Young published a research report in 2012， stating that 67% of Chinese companies chose to set up European regional headquarters in Germany and 72% of Chinese enterprises hoped to establish their R&D centers in Germany.

As Wang Qian said， the traditional advantages of Germany are within the machine manufacturing， infrastructural construction， auto industry， chemistry， energy and telecom. The German engineering skills， known for being high-end， exquisite and precise， are very competitive in the international market especially when it comes to the smart solutions based on science and technologies.

Germany not only has Siemens， Bosch， Volkswagen and other well-known enterprises， it also has numerous small yet powerful family enterprises， which are taking the leading place in the segmented markets with high requirements of technologies. They are the main force to drive the development of German economy. They can benefit from Chinese companies’ investment. Meanwhile， they are very willing to get into the Chinese market through that method. “The Chinese companies’ investment into Germany will be a win-win result，” Wang Qian said.

Pilatus to move its production to China

Being bullish on the aviation market in China， the world-leading single engine turboprop aircraft manufacturer Pilatus is going to gradually move its production line in Switzerland to China.

Fred Muggli， sales director of Pilatus’s PC-12NG， said in the 2014 Shanghai Business Aircraft Fair that the company had set up a joint venture in Chongqing to build the production lines of wings for PC-12NG and the assembly lines of PC-6.

According to him， the joint venture is controlled by Pilatus. The planned investment amounts to US$400 million. It is expected to be finished in two years and six to seven maintenance and service facilities are to be finished as well.

“We decided to be here because we think it is better for us to get closer to the clients. And the closeness could make us know more about the markets and clients，” Muggli said.

Pilatus was built in 1939 and is the only company that develops， produces and sells aircrafts to global investors. In China， it has delivered six PC-10 planes and 10 more are to be delivered this year. Its planes are mainly used for agriculture， firefighting and aerial photographing.

Alstom bites into China’s nuclear market

“The total capacity of nuclear power plants in China will have reached 8 million kilowatt by 2014， 5 million kilowatt of which is generated by the turbines and diesel engines from Alstom，” said Chen Chaoming， vice president of Alstom Nuclear China.

After the Fukushima incident in Japan， China has frozen the examination and licensing of nuclear power project for two years. In October 2012， China’s State Council held a meeting and passed the 2011-2020 Planning for Safety of Nuclear Power Plants and the Long-Term Development Plan for Nuclear Power （2011-2020）， marking the official restart of nuclear power projects in China. However， in these two files， the Chinese government has fixed the plan of building a few nuclear power plants in coastal areas if the locations and influences of these plants are intensively studied and debated. No nuclear power plants are to be built in inland China.

This January， the State Administration of Energy published the Guiding Opinions for Energy Industry in 2014， proposing the idea of restarting the examination of key nuclear power projects and promoting the construction of nuclear power plants in coastal areas steadily and gradually. This March， the topic of“starting the construction of nuclear power plants that have been approved”was officially scripted into the governmental report of the State Council. This is considered a signal of China to accelerate the nuclear power development. The market of devices for nuclear power plants was immediately placed under the spotlight.

As one of the major suppliers of devices for nuclear power plants in the world， Alstom pays close attention to the nuclear power policies of Chinese government. According to Chen Chaoming， China’s nuclear market is still a vigorous“young man” in today’s world.

Of the nuclear power plant operators in China， China Guangdong Nuclear Corp， China Nuclear Power and China Power Investment are the major clients of Alstom. The French company provides those clients with turbines， diesels， liquid purification facilities through its Chinese partner China Oriental Electric Group Limited （Oriental Electric）.

“The strategic cooperation between Alstom and Oriental Electric has recently expanded from CPR 1000 and EPR reactor to AP 1000 reactor. Our alliance could take 50% of the turbine market in China，” Chen Chaoming said.

By the end of 2013， China National Nuclear Administration published the Letter of Opinions for the Review of Locations for the No. 1 and No. 2 power units for Xudabao Nuclear Power Plant. This was the last feasible part of this project to get the nod of the government， laying a foundation to give out a complete license for this new project.

Chen Chaoming said： “the devices for Xudabao Nuclear Power Plan have all their core parts imported from Europe.”

New department set in MOC to build silk way economic zone

China’s Ministry of Commerce（MOC） went through a series of changes to its organizational structure. A new department dubbed Euro-Asia Department is built upon the previous European Department.

The MOC began to think of the plan as of last year and the preparatory work started this year. The main goal is to promote the construction of the silk way economic zone.

Shen Danyang， spokesman for the MOC， said that the silk way economic zone will be extended to Russia， Ukraine， Belarus and other nine countries. The new department is going to be responsible for organizing， detailing and implementing the economic cooperative strategies， building and boosting bilateral relations， establishing regional governmentlevel economic and trade alliance and so on. The new system is good for improving the working efficiency and improving the trade relations between China and this area.

According to Shen Danyang， building the silk way economic zone is an important measure for expanding the opening-up of China. Russia and other countries of former Soviet Union will be considered the start of the silk way economic zone. They will play an important role in the future construction.

The main departmental changes include the integration of the former department of foreign trade， department of electrics and sci-tech industries， the bureau of fair exports and imports trade， the bureau of industrial damage investigation and the European Department， based on which the new department of foreign trade， the bureau of trade remedy and investigation， the department of industrial safety and exports & imports regulation and the Europe-Asia Department are to be established.

All these new departments are given their unique functions based on four principles： to improve the macroeconomic management of foreign trade， to intensify the ability of handling international trade disputes， to fortify the economic and trade relations between China and neighboring country and to improve the industrial safety and regulation over export and import.

“Vulture investors” eye China’s commercial property market

Though the image of vulture is not favorable for most people， more and foreign institutional investors are turning into that role. They linger on the “woeful”commercial property market of China， seeking opportunities to capture the projects that are in trouble.

In April， Gaw Capital Partners announced the spending of US$928 million acquiring Pacific Century Place Beijing， creating the record of biggest acquisition of a single business property in China.

The Pacific Century Place Beijing is considered a disappointing project. It is located in the prosperous Sanlitun business center but failed to perform well in recruiting companies. By February 28， 2014， the occupation rates of Tower A and Tower B of this project respectively reached 88.9% and 90%； however， the Tower C and Tower D only had 72.8% and 57.2% of its apartments leased out. Only 19.5% of the area for shopping had been used by then.

The underperformance turned this project into a perfect prey of “vulture investors”. Gaw Capital， as the purchaser， is good at acquiring old buildings， redesigning， positioning and restructuring them to increase their value from its very beginning. This time， it acquired Pacific Century Place Beijing very economically： if the garage area is not included， the price per square meter is only 34 thousand yuan.

In a news briefs， Gaw Capital’s president and co-founder Gaw Kenneth said：“This is a precious opportunity. We may not have the same chance of buying such a large project in a CBD of Beijing to provide stable cash flow. We believe that the assets of this kind can offer incredible returns.”

In truth， the vile ecosystem for the commercial property projects in China is attracting an increasing number of “vulture investors” like Gaw Capital. A large number of commercial property projects in second- and third-tier cities are reported with operating problems. Even the office buildings and shopping centers in the first-tier cities are not immune to the depression.

“Many commercial property projects in the second- and third-tier cities of China are in the ‘stalemate’. Most of these projects are hybrid ones with both commercial and residential purposes. Developers usually have no power to continue the construction and operation of the commercial parts after finishing the residential project. The reason is simple： the residential apartments cannot be sold out. Without residents， there will be no people flow for the commercial projects. The local governments know of this too， but they have got the land leasing payment and ignored the delay of developers in the commercial projects，” said Li Jian， a director of Cushman & Wakefield in China.

Meanwhile， the excess supply， lowered rent and vacancy rate are rising in first-tier cities. According to the statistical data from DTZ， the average daily rent for A-class office buildings in Shanghai was 8.65 yuan per square meter in the first quarter of 2014， 0.92% lower than the previous quarter and 1.03% lower than the first quarter of last year. It was also the lowest point in two years.

In addition， the banks are gradually reducing the loans for the property developers； the government is tightening the control over shadow banks. Those factors lead to the tension in the capital chain of property developers. The commercial property projects that have been put into use can be aided by the loans for operation， but only a few are qualified for these projects. The other fundraising channels include the trust financing with a high cost， selling the shares to investment institutions， yielding the control rights of the projects or even offering the entire projects.

“The good projects in Beijing and Shanghai have no problem to find suitable buyers. What remains debatable is whether the two parties can find a reasonable price，” Li Jian said. Presently， the institutional investors are focusing on the first- and second-tier cities. They are barely interested in the projects in thirdand fourth-tier cities because of the unpredictable risks.

For vulture investors， the residential projects are the most welcome because of the simple operating procedures. They are followed by the office buildings， because of great returns on investment in spite of the high cost of restructuring old buildings. The official buildings with good locations are especially popular and can attract many investors.

“The biggest test in acquiring underperforming projects is with the actual operation， during which there are a lot of legal risks， such as the ones of property rights， planning and so on. Foreign investors also attach great importance to local property developers’ false report about the area of the building. Therefore， they are very careful in choosing targets and partners. Listed companies are their primary choices and state-owned enterprises are more favorable when it comes to the regional projects，” said Li Jian.