China: Yuan Hits High Against Greenback; Apple (NASDAQ:AAPL) Maps Better Than Google (NASDAQ:GOOG) in the Mainland
Meanwhile, foreign banks reported strong profits in China for 2011.
MINYANVILLE ORIGINAL The yuan rose to its highest level in 19 years on Friday, touching 6.2835 per dollar, thanks to both quantitative easing by the Federal Reserve and a record injection of funds into the financial system by China’s central bank.
“The yuan’s recent rise, on first glance, comes as a surprise considering all of the doom and gloom surrounding the Chinese economy,” Christopher Vecchio, currency analyst at DailyFX, told MarketWatch. “However, it’s important to consider that the Fed’s QE3 program creates excess liquidity — like its predecessors — that, in theory, should flow to the safest- , highest-yielding assets.”
“With US Treasury yields low, investors are inherently forced to search elsewhere for return [and] despite the Chinese economy’s recent weakness, we must respect the fact that it is the world’s second-largest economy and still maintains a growth rate north of 7%” year on year, he said.
The yuan’s rise is likely linked to an improvement in the performance of the Shanghai Composite Index, where investors are expecting the government to launch new stimulatory measures any minute.
“Funds are flowing back into the market as people bet China will soon act more aggressively to revive growth,” Kenix Lai, a Hong Kong-based foreign-exchange analyst at Bank of East Asia, told Bloomberg. “There’s always expectations that the government will announce important polices before or at the end of a long holiday. The stock market is also rallying on stimulus bets.”
The timing of the yuan’s rise against the greenback will likely ease concerns that currency manipulation by the Chinese will be a topic of contention at the upcoming US presidential debates.
Here is the rest of this week’s business news:
Chinese Economy: The world’s second-largest economy will grow 7.8% this year, according to Fitch, who previously forecast in June that Chinese growth in 2012 would come in at 8%.
“The slowdown in China’s economy to 7.6% in (the second quarter of 2012) from 9.3% in 2011 has refocused attention on the possibility of a hard landing – a non-technical expression for a much sharper growth slowdown,” said Fitch in a report, according to CNBC.
“Fitch does not expect such an outcome. Rather the most likely triggers for such a scenario would come from a much deeper downturn in either the labor or property market than currently expected.”
Meanwhile, Goldman Sachs expects China’s growth to slow down to an average of 7% in the next decade. "China is in the early stages of going from a long period where it was all about the quantity of growth, into an era where the focus is on the quality of growth," Jim O'Neill, Chairman of Goldman Sachs Asset Management, said at a news conference, reports Reuters.
Although O’Neill said that the world has to get used to having China’s “drug of 10% growth,” he also pointed out that the Chinese stock market still has the most room to grow among BRIC countries. As the Chinese economy matures, O’Neill sees consumer-related and health care companies thriving.
Apple (NASDAQ:AAPL): With Apple suffering an embarrassing public relations nightmare over its error-strewn Maps app, the company will be glad to learn that its Maps app might be better than Google’s (NASDAQ:GOOG) in China. Anthony Drendel, a programmer based in the mainland, ran a side-by-side comparison of iOS 6 Maps and Google’s Maps apps and found the former to be “a huge improvement” over the latter.
Both Apple and Google use mapping data from Chinese company AutoNavi (NASDAQ:AMAP), but Drendel points out that Apple Maps provides greater detail and accuracy, particularly when one steps out of big cities. He writes:
In my experience, the new version of Maps zooms in much further, shows more points of interest, clearly labels banks and cellphone shops (China Mobile, China Unicom, and China Telecom), and gives the locations of ATMs and public restrooms (my original iPad running iOS 5 with Google-powered Maps doesn't show either of those things).
The killer feature, though, is that iOS 6 Maps shows both English names and Chinese characters for everything, whereas Google-powered Maps only shows the English translation (on iOS devices whose language is English). This is killer. English translations are almost useless in China because—guess what—Chinese people don't speak English. For those of us who can read (at least some) Chinese, this feature is even more important. We can ask for places by name instead of just pointing at its location on a map.
Foreign banks: Reversing mediocre results form recent years, foreign banks operating in China turned in impressive profits in 2011, according to a report from KPMG, which found that the China operations of 33 foreign banks took in more than twice as much in net profits in 2011 compared to a year ago.
Citigroup’s (NYSE:C) China division, for example, saw net profits rise 45% to 1.26 billion yuan ($200 million), following a 19% increase in 2010. Citigroup’s China CEO Andrew Au told the Wall Street Journal that he expects his company to continue posting solid results as it further expands in China.
HSBC (NYSE:HBC) also saw its Chinese arm log net profit of 3.42 billion yuan, an increase of nearly 400% from 2010. JPMorgan (NYSE:JPM), which does not have a retail unit in China, also quadrupled net income to 297 million yuan, compared to a 49% plunge a year ago, while Standard Chartered (PINK:SCBFF) grew profit over 50% to 883 million yuan.
It will be tough for these banks to maintain and or even surpass their outstanding 2011 performances, however, due to increased competition from local banks and a slowdown in China’s economy.
Chinese billionaires: In China, the rich are getting poorer, a new study by the Shanghai-based luxury-publishing and events group Hurun Report finds, thanks to a year of poor performance in Chinese stock markets. There were only 251 billionaires (measured in USD) in China this year, down 20 from a year ago.
Leading the pack is 67 year-old Zong Qinghou, head of the Hangzhou Wahaha beverage group, with a personal fortune of $12.6 billion, followed by Dalian Wanda chairman Wang Jianlin, with $10.3 billion. Robin Li, chairman and CEO of Chinese search giant Baidu (NASDAQ:BIDU), is third with $8 billion.
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