Despite Rumors to the Contrary, Beijing Economy Continues to Boom
[Editor’s Note: Money Morning Investment Director Keith Fitz-Gerald is one of the world’s leading experts on Asia, especially China. Right now, Fitz-Gerald is leading an investment tour of the Red Dragon, and he’ll be sending along regular investment travelogues to update Money Morning readers on his latest observations. This is the first installment of that series.]
By Keith Fitz-Gerald
Investment Director
Money Morning/The Money Map Report
BEIJING, The People’s 
Republic of China – If there’s a recession here in China, I don’t see it.
Granted, I just stepped off the plane here in Beijing a few hours ago, but already the city feels much more vibrant than I expected, given the dire reports that keep appearing in the mainstream Western financial-news media. The Beijing economy appears strong.
Consider the airport. While more subdued than it was just prior to the 2008 Summer Olympic Games, it’s still humming. And the airplane on the flight over here was packed, with nary a vacant seat in sight. Of course, having my luggage actually beat me to the carousel was a big plus – just like it always is. There’s a policy that all bags are unloaded in 12 minutes.
From my hotel room in the Beijing Central Business District, I can see no end of sleek black cars, including the latest VWs, BMWs, Audis and Toyotas. Even Mini Coopers are becoming a common sight. But to many a guy’s dismay. According to my friend Chris Choi, a longtime Beijinger, the girls actually prefer big SUVs, including Range Rovers, Toyota FJs and, of course, the ubiquitous Jeep.
Speaking of cars, the Shanghai auto show kicked off here in China with the world’s automakers vying to get a foothold in this market, which is one of the fastest-growing in the world. Volkswagen AG (ADR: VLKAY), Porsche SE (soon to have closer ties to VW), Bentley Motors Ltd. are all here – and are enjoying record sales in China.
Some carmakers – such as China’s Geely Automobile Holdings Ltd. – are making noises about their global ambitions, too. To those who think that’s unlikely, take a moment to remember how dismissive American consumers were about the prospects of Japan’s automakers back in the late 1960s or early 1970s. And now Japan dominates the American market.
Are you listening, Detroit? I hope so.
I took a quick stroll around the block to shake off some jet lag. In that short time, I noted two new malls filled with Prada, Gucci, Versace and other upscale brands. Gone are the Citigroup Inc. (C) advertisements, but in their place are Deutsche Bank AG (DB) branches, as well as those of domestic China banks, which remain spectacularly liquid – meaning they’ve escaped the vast majority of the credit-crisis contagion.
Then there’s the media. Recent liberalization of media ownership and usage requirements have created a form of Wild West capitalism that our industries once dreamed about, but now only visit in the museums of their boardroom minutes. With ownership restrictions being substantially relaxed, companies that possess global brands are stepping up their efforts to reach consumers through increasingly direct advertising channels that are already making them known.
I’m excited about what I expect that I’ll be able to bring you over the next several weeks.
Stay tuned.
News and Related Story Links:
- Beijing Summer Olympic Games (2008):
Official Web Site. - Wikipedia:
- ChinaTravelGuide.com:
Beijing Travel Guide. - Mini.com:
Worldwide Directory of Mini Web Sites. - Shanghai Auto 2009:
Official Auto Show Web Site. - Bloomberg:
Porsche, Piech Families Said to Sell Car Assets to VW.
Comment by Manjit Bhatia on 27 April 2009:
If this is Keith Fitz-Gerald’s “analysis” of the Chinese economy, then China’s so-called Communist dictatorship would embrace him with a red carpet and a hug that would have made Soviet Russia’s bear-hugs look like kindergarten play. So he took a stroll around Beijing and saw the glitz and all that jazz. And that’s exactly what China will show — the glitz. Dig deeper and any Sinologist and economist with a critical mind will tell you China has a dark underbelly. And that dark underbelly says plenty about keeping up appearances, the chimera, but has Fitz-Gerald ever tried asking the technocrats, let alone the Communist Party hacks, to show them the real book, the real statistics — not the other book with the fake statistics? No argument that China has been growing exponentially since 1982. No question that China has become a wealthy country, by historical standards, with vast currency reserves, record trade and budget surpluses, and foreign direct investments that makes it the envy of the world. But unmask all of this and you’ll find heavy state interventions in the market, a state that’s always propping up a number of its banks, picking winners in leading sectors and, best of all, without the slightest embarrassment about its serious lack of good governance and policy opacity. Fitz-Gerald will do well, whilst in Beijing, to ask just where the smart money, especially that which belongs to Chinese entrepreneurs, goes. He’ll get no where. And if he’s able to sniff it out, he’ll soon discover that much of it goes where the State wants it to go, and often it goes into State-owned firms or quasi-State firms with joint ventures with foreign firms. And then he should look into the regulatory environment in which the Chinese economy runs and I’m sure he will soon stop putting out such travelogues that, after all, can be easily found in many alleys of blind financial journalism. Here’s a gem by Fitz-Gerald: “Then there’s the media. Recent liberalization of media ownership and usage requirements have created a form of Wild West capitalism that our industries once dreamed about, but now only visit in the museums of their boardroom minutes.” Oh, please … enough already.
Comment by Doug Young on 28 April 2009:
“Wild West Capitalism”? Most likely what the Chinese citizens don’t want, American citizens neither. Capitalism can be could, but Lassieze-fair capitalism(WWC),can be pure evil. Not a darn thing to prevent those capitalists accumulate enough power to walk all over the smaller capitalists, and the consumer. Unfettered WWC is what has, and still does foster communist, and socialist .movements. The collective capitalists better wake up to understand it’s not all about them or an unsustainable high growth rate in profits. Then again I have always had a different read of history than most.
Comment by Lee on 28 April 2009:
I took Manjit Bhatia’s point somewhat and as a Chinese, admit that some things you said are true in China. However, we look it at a long term perspective, China is growing, and Chinese people are growing, especially the youth, in this global economy, help and support China to develop is to help the whole world.