Another Brick in the Wall: Link Edition III

Below are 10 business-related stories regarding China from the past 10 days.  Many thanks to the WSJ and Sinocism for providing some of them.  Feel free to send me any you may come across as well.

Sotheby’s is working with Tefaf, the organizers of one of the largest annual European art fairs.  See Chapter 11 for more about the art market.

All goods and services in the new zone will be sold tax free.  Geared towards arts and entertainment and will be located next to Beijing’s Capital Airport.  Sotheby’s is going to run the art zone and the whole thing will be modeled after Singapore’s Freeport facility.  Supposed to be up and running in 2014.  See Chapter 11 for more about the art market and Chapter 14 about pop culture and entertainment.

Several Italian brands including Prada and Gucci (among others) are playing catch-up in the largest luxury market.  One interesting stat: Hermès, 50% of its sales come from China.  Check out the linked video for how and why.  See Chapter 11 for more about the luxury goods market.

There over a million millionaires (USD) and 2.7 million high-networth individuals (HNWI) in China and according to Hurun 85% of HNWI will send their children overseas.  Where will these families live?  Perhaps in style, in domiciles that are customized to cater to Chinese tastes.  In Chapter 5, footnote 7 I noted that another area Chinese individuals and firms are now investing in is the US real estate and property market.  According to a recent report, “[b]uyers from China also invested almost $2 billion in commercial property in 2011, or quadruple what they spent several years ago.”  One of the recent deals was led by China’s Vanke (the largest real estate developer on the mainland) who agreed to a $620 million project in San Fransico in December 2012.  See Chinese buyers lead foreign investment in US housing market from Fox News, China Vanke Arrives in U.S. from The Wall Street Journal and Lennar Said to Get $1.7 Billion San Francisco Loan from Bloomberg

Although sobering, this is a great story for those unfamiliar with the various sacrifices that parents and families will do to put their kids through higher education.  And the labor market afterwards is hyper competitive (hence the reason why many families with the means, will send their kids overseas or cajole their kin to go to grad school).  I have had about a dozen former students message me over the past couple weeks as they are about to graduate and are facing similar circumstances: a degree without any job prospects related to their field of study.  See Chapter 9 for more about education and the labor market.

Another detailed story, with hard numbers, regarding the skillset mismatch of college graduates and labor market.  According to one survey, 16.4% of new Chinese college graduates are currently unemployed versus a mere 4.2% who quit after elementary school.  One of the reasons why is that those with elementary educations are willing to work in factories whereas many of the college graduates are looking for an iron rice bowl job (铁饭碗).  Furthermore, for most college grads that do get jobs, they typically have to settle for wages that are actually lower than their counterparts who only attended elementary school.  This of course presents an opportunity for new businesspeople to find educated workers to hire at rates significantly lower than their Western counterparts.  See Chapter 9 for more about education and the labor market.

60% of the 194,029 Chinese students studying in the US pay for the education out-of-pocket, through private financing.  And these education bills can reach up to $200,000 for a four-year education (there are over 100 colleges in the US where tuition/fees cost $50,000 a year).  Yet the immediate return-on-investment in terms of salaries upon graduation is less than inspiring, although the article interviews several experts that argue that in the long run, it will payoff.  See Chapter 9 for more about education and the labor market.

This is the same Caterpillar that got burned in a $586 million fraudulent acquisition (a subsidiary bought a Chinese firm that grossly overstated its assets).  See Cat Scammed: How A U.S. Company Blew Half A Billion Dollars In China from Forbes and Caterpillar Still Investigating Chinese Accounting Discrepancy from Bloomberg.  Keep in mind however, that by 2020 China’s urban population will reach 800 million, by 2025 there will be 221 cities with 1 million people and by 2030 there will be more than 1 billion people living in cities.  See China’s urban population to hit 800 million by 2020 from People’s Daily, China’s Megacities from Bloomberg and one of the upcoming challenges that policy makers face with this urbanization is reforming the Hukou, or household registration system.  See also Eight Questions: Tom Miller, ‘China’s Urban Billion’ from The Wall Street Journal.

PE firms with assets of more than 500 million RMB (about $80 million) should register with provincial governments.  For more about PE see Chapter 5.

New documentary about Jeremy Lin (林书豪), the dark horse NBA player who all of my students talked about last year (and even this year).  Of course, being a Dallas-native I think it’s too bad he doesn’t play for the Mavericks, they could use the help.  See Chapter 8 for more on basketball in China.

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