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Disney Opening China Theme Park

Shanghai Disney Resort to open after more than a decade of planning, five years of construction

A $5.5 billion bet that China is ready to embrace one of the most American of corporate symbols will finally come to fruition in June.

Walt Disney Co. on Tuesday said Shanghai Disney Resort, its first theme park in mainland China, will open June 16 after more than a decade of planning. Originally scheduled to debut in 2015, Disney last year delayed the launch to the first half this year.

The opening date, on the tail end of that time frame, reflects not only the significant construction challenges of a 963-acre theme park, hotel and entertainment complex, but the political and cultural barriers of undertaking such a massive project in partnership with a state-owned consortium in a communist country.

The opening will now come amid a slowdown in China’s economic growth, potentially threatening the confidence that leads middle class consumers to take pricey vacations.

It also comes as the entertainment giant’s recent big-screen success has better established its brands in the country. “Star Wars: The Force Awakens” opened last weekend to a healthy $53 million there. In 2015, Disney released a number of box office hits in China including “Avengers: Age of Ultron,” which made $225 million there; “Ant-Man,” which made $103 million; and “Cinderella,” with $68 million.

Chinese and Hollywood companies have been forming partnerships and striking deals at an increasing rate recently, as studios rush to establish their brands in the world’s most populous nation and the Chinese government views entertainment as an important piece of “soft power.” On Monday, Chinese conglomerate Dalian Wanda Group Co. agreed to acquire film production and finance company Legendary Entertainment for a hefty $3.5 billion.

Shanghai Disney remains the largest such deal to date. The park is 57%-owned by a state-backed consortium, Shanghai Shendi, and 43% by Walt Disney Co. Local partners are responsible for construction and the accompanying infrastructure, including a subway extension.

However, the media giant is 70% owner of the joint venture that will operate the park, and its executives are largely overseeing that process. Any problems at Shanghai Disneyland won’t just affect the theme park, but could hurt public perception of all of Walt Disney’s businesses in the country, from film to television to consumer products.

Significant competition is on the horizon. Comcast Corp.’s Universal Parks & Resorts is building a $3.3 billion theme park outside of Beijing that could include rides based on Harry Potter, which have proved very popular at the company’s Orlando, Fla., location.

Theme parks are Disney’s second-largest business behind television. Last fiscal year, revenue for the segment grew 7% to $16.1 billion and operating income rose 14% to $3 billion. However most of that growth has been driven by Disneyland and Walt Disney World in the U.S. International operations in Hong Kong and Paris have recently been a drag on growth.

Disney hasn’t disclosed the capacity of its Shanghai Disneyland theme park, but it is expected to be one of the largest of the company’s six at launch, a person close to the park’s planning said.

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Starbucks to help pay for China workers’ housing

The Seattle coffee giant says it will help subsidize housing for many of its staffers in China, adding a new twist to the Chinese practice of providing dorms for migrating workers.

By Ángel González
Seattle Times business reporter

Starbucks says it will spend millions to subsidize housing for thousands of its workers in China.

The move is the latest in a series of benefits that Starbucks has been extending to big swaths of its workforce in different markets — from subsidized college tuition and pay raises in the United States, to loans for rent deposits in the United Kingdom.

Chinese industrial companies often build huge dormitory complexes for employees moving from the countryside to work in their factories.

That practice “has been expected in China, especially for non-married workers,” though not in high-paying gigs such as tech and consulting, says Kristi Heim, president of the Washington State China Relations Council.

Starbucks’ plan adapts that custom to the retail sector, which is gaining in importance as China transitions from being the world’s factory to a major consumer economy.

The housing program is limited to full-time staffers. About 7,000 of Starbucks’ total workforce of 30,000 in China will qualify immediately, with an additional 3,000 eligible in the near future. They don’t have to be migrants to have access to the benefit, which is geared to baristas and shift supervisors.

The company wouldn’t disclose how much it may spend per employee, saying that will vary from city to city and from “situation to situation.” For some employees it could provide “well more” than half of the cost of housing, the company says.

Unlike the manufacturers that provide centralized dorms, Starbucks will give employees an allowance to help them pay for the housing of their choice.

The company also declined to provide an estimate of the program’s total cost, only saying it will be a “multimillion-dollar” investment.

“We listened very carefully to what the needs of the partners are, and one of the things they talked about was housing,” said John Culver, who leads Starbucks operations in China and the Asia Pacific region.

“You have a lot of people migrating into bigger cities, and the cost of living and rent in those cities is higher,” Culver said. “We want to make sure we’re giving them the opportunity so that they can afford to live there.”

The housing subsidy is being announced in Chendgu, a massive city about 1,200 miles west of Shanghai, where on Tuesday top Starbucks brass, including CEO Howard Schultz, were scheduled to meet with 1,300 people, including employees and their families.

It’s the fourth so-called Partner Family Forum, in which Starbucks executives pitch the benefits of working for the company not only to employees, but also their families, which play a big role in career choices in China.

Starbucks is also announcing other new perks, such as a sabbatical program for employees with a tenure of at least 10 years, dubbed “coffee break.” A similar perk exists in the United States.

China represents big bucks for Starbucks. The company has 2,000 stores there, and it plans to have 3,400 by 2019. It’s already Starbucks’ second-largest market after the United States. The company has stores in 100 cities, including 75 stores in Chengdu.

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Hong Kong’s largest telco launches streaming service for Asia

Netflix has a new regional competitor, with a new service, PCCW’s Viu, to provide Asian customers with content from Korea for free.

loysius LowHot on the heels of Netflix launching in Asia (as well as the rest of the world), Hong Kong’s largest telecommunications company, PCCW, is making a streaming service available in the region.

The new service, called Viu (pronounced “view”), will be streaming the latest Korean dramas and variety programs a mere eight hours after they air on TV. Viewers will have the option to view the shows with English or Chinese subtitles.

This makes it much faster than some of its competitors, including Dramafever, which also streams Korean content to US audiences — though it isn’t available in Asia.

Growing Internet speeds around the world give opportunity to companies like PCCW, with more and more people having Internet strong enough to stream high quality video. Unfortunately for smaller players in the streaming industry, global leader Netflix is also taking advantage — last week at CES the American giant announced that its widely used platform was expanding its reach to over 130 countries, a huge increase from the 60 it was previously available in.

Meanwhile, Korean content, though it may sound niche, actually has a large market throughout Asia. “We’ve done a survey of online users in Asia,” said Janice Lee, Viu’s managing director of PCCW Media at the local launch in Singapore. “Out of that actually, anywhere from 50 to 80 percent watch Korean dramas. In Singapore, it’s over 50 percent.”

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GM To Import Buicks From China

This Is A Big Economic Change: GM To Import Buicks From China

Tim Worstall

Two decades ago this is something that no one really thought would happen. The very idea that one of Detroit’s Big Three would be importing cars from China to sell to Americans. And especially something like a crossover SUV, where the profit margins are usually thought to be large enough to cover US wage costs. But it is happening: General Motors GM -1.56% has just announced that its new Buick Envision will be sold in the US but it is manufactured in China. Not just assembled, we should note, but properly manufactured. Designed in Detroit still, yes, the plant at least partly owned there, but the actual labour of construction is all in China.

There are, of course, car industry specifics as to why this is happening but that’s not what we’re about here. Rather, it’s just fascinating how the economics of trade have changed in such a short time. I’m old enough to recall when Japanese and European imports were decried: tariff barriers were erected certainly against the Japanese and to some extent against the European manufactures. At which point all went off and built plants outside the traditional and union dominated Rust Belt and carried on making cars that people wanted to buy. While there’s a bit of whining from the UAW about this more recent idea of importing from China no one is actually suggesting either than GM cannot do this, should not do this or should be taxed out of doing this.

The basic news:

When the Buick Envision hits the streets late this spring, it will carry a unique distinction: it will be the first Chinese-built model line to be sold in the United States.

That is something of a distinction. And we can regard it greatly to China’s credit that it has been able to do this. Back in 1978 China’s GDP per capita was $1,000 a year in modern money. That’s the same level as England in 1600. America has never actually, well, not since the European arrival, been that poor. And yet less than 40 years later it is capable of producing something to compete directly with locally made products? Do note that this isn’t, as those early Japanese cars were, being marketed as something seriously cheap and not of good quality. This is carrying a mainstream brand and they’re just not going to do that if the product itself is not up to scratch.

As to why there isn’t that old outcry, it’s simply because while this may be the first from China, people are just more relaxed about imports in general these days:

Buick wants to capture a piece of the rapidly growing midsize crossover segment by shipping from a joint venture plant in Yantai, China, a vehicle launched in that market more than a year ago. Last year, Buick sold more than 140,000 Envisions in China.

So, they’re already making the car in bulk over there. They’re tooled up, the workforce is trained, they’ve got their supply chain working: why not make them there then ship them?

Stephanie Brinley, an industry analyst with IHS Automotive, doesn’t expect that most American consumers will care where the Envision or any other vehicle is built.

“Buick is already importing from South Korea, Europe and Poland,” Brinley said. “Vehicles are coming from all over the world for all manufacturers.”

And that, of course, is how it should be. The point and purpose of trade is so that we get to enjoy those lovely imports: exports are just the work we do to get them. And as both Adam Smith and Frederic Bastiat pointed out, the whole point of the economy is consumption. We don’t in fact care who makes something, nor where: we care only that we get to enjoy the use of it.

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China’s largest bank buys huge 1,500-tonne gold vault in London

ICBC Standard Bank has also applied to become a clearing member of the London gold and silver over-the-counter business

By Reuters

China’s largest bank is buying the lease on Deutsche Bank’s huge London gold and silver vault, enlarging its footprint in the city’s bullion market, according to reports.

ICBC Standard Bank, which took a controlling stake in London-based Global Markets business last year, has also applied to become a clearing member of the London gold and silver over-the-counter business.

The Chinese and South African lender is aiming to fill the gap left by Western banks, which are retreating from commodities to cut costs and reduce regulatory burden.

“They [ICBC Standard Bank] have taken on the lease for the vault,” Reuters quoted a source as saying.

Currently, five banks – JP Morgan, HSBC, Bank of Nova Scotia, Barclays and UBS – settle daily bullion transactions between dealers, amounting to more than $5 trillion-worth of metal each year in the London over-the-counter market.

These banks are shareholders of the London Precious Metals Clearing company. They will decide whether to accept or reject ICBC Standard Bank’s application within the next few months.

“They are applying for clearing membership at the moment, but that’s still subject to a vote, which has not taken place yet,” the source said.

The vault became operational in June 2014 and has a capacity of 1,500 tonnes. It was built and is managed by G4S.

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Mark Schlarbaum

China rising: the 10 tallest skyscrapers of 2016 – in pictures

The Council on Tall Buildings and Urban Habitat keeps tabs on skyscrapers under construction around the world. Of the 10 tallest due for completion this year, six are in China, two in Dubai and one each in Seoul and Moscow

Click HERE for the pictures.

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China builds a drone to fly humans

China’s Ehang builds a drone to fly humans

Leslie Hook

Stepping into a personal drone that will fly you to your destination seems like the stuff of science fiction, but one Chinese start-up proposes to do exactly that.

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In one of the most ambitious — some might say outlandish — launches at the CES 2016 event in Las Vegas, drone maker Ehang released the new “184” drone, a self-flying vehicle that can carry a human passenger.

Regulators have not yet approved the vehicle for human use, however, and all drones are restricted in Las Vegas, meaning CES attendees will not be able to see the 184 fly.

Guangzhou-based Ehang has raised more than $50m from venture investors and is taking on China’s leading drone maker DJI at a time when drone sales worldwide are soaring.

Chinese drone makers have gained pole position in the global industry, thanks in part to China’s rules on testing and flying drones, which are more permissive than in the US. DJI made the first mass-market camera drone — the Phantom — and is now the biggest consumer drone company in the world by sales.

Sales of drones, many of which are made in China, will more than double this year in the US, hitting nearly $1bn, the Consumer Technology Association said.

However, drone regulations continue to pose a challenge for recreational and commercial drone users around the world. In the US, the Federal Aviation Administration announced last month that all drones weighing more than half a pound would have to be formally registered.

Ehang said it was in the process of applying for certification to fly the 184 drone, and has already completed testing with human passengers in China.

Shang-wen Hsiao, co-founder and chief financial officer, told the Financial Times he was optimistic that the drone would be adopted by cities seeking to solve congestion issues.

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Oil Finds a Silver Lining in China’s Unsated Thirst for Crude

Bloomberg News

Imports seen expanding 8% to 7.2 million barrels a day in 2016
Demand will be driven by stockpiling, independent refiners

China’s insatiable appetite for crude is at least one thing oil bulls can count on this year.

The world’s biggest commodity consumer may buy 8 percent more oil from overseas in 2016, taking average purchases to 7.2 million barrels a day, according to the median of seven respondents in a Bloomberg survey including FGE and Energy Aspects Ltd. The country’s inbound shipments in the first 11 months of last year increased 8.8 percent to 6.63 million barrels a day and touched a monthly record of 7.4 million in April, customs data show.

The prospect of China continuing to absorb a glut of supply from overseas will encourage investors holding out for a recovery in oil from the lowest level in 11 years. The nation, which has overtaken the U.S. as the world’s biggest buyer on occasions last year, is taking advantage of the two-year slump in prices to hoard crude for emergencies. Demand is further expanding as the government relaxes rules to allow imports by private refiners.

“Growth in China’s crude imports is a supportive factor for crude prices,” said Eugene Lindell, an analyst with Vienna-based JBC Energy GmbH, who forecast a growth rate of 6 percent. “It will help tackle the crude surplus seen over the first half year in 2016.”

Brent crude, the international benchmark, slumped to an 11-year low last month amid speculation suppliers from the Middle East to the U.S. will exacerbate a record glut as they fight for market share. The Organization of Petroleum Exporting Countries raised production to the highest in more than three years in November and effectively scrapped its output ceiling a month later. Meanwhile, the U.S. ended its 40-year export ban and Iran plans to boost output by about 500,000 barrels a day within weeks of international sanctions being lifted.

China may start four additional strategic petroleum reserves this year, augmenting its existing eight, as part of its ultimate goal of stockpiling enough oil to cover 100 days worth of imports by 2020. The country held about 29 days of supply as of the middle of 2015, according to Bloomberg calculations based on National Bureau of Statistics data.

Crude imports for emergency reserves may double to 230,000 barrels a day this year as new tanks start operating, according to Chi Zhang, an analyst with Barclays Plc in Hong Kong. China stockpiled 26.1 million metric tons (about 191 million barrels) of crude as of mid-2015 at eight SPR sites and commercial storage tanks, the NBS said on Dec. 11. The country will build and fill 74 million barrels of SPR capacity this year, according to JBC’s Lindell.

“We expect that nearly 200,000 barrels a day of crude oil will be added to inventory in 2016” including strategic reserves, said Wu Kang, a Beijing-based analyst with industry consultant FGE, who gave the median estimate in the survey. “This is one of the major factors determining crude oil imports.”
Teapot Demand

China’s independent refiners, known as teapots, account for almost a third of the nation’s processing capacity. Thirteen of them have been granted import quotas totaling a combined 55 million tons, or 18 percent of the nation’s annual imports, as the government seeks to promote private investment and boost the economy.

The three teapots with the biggest import quotas have said they’ll utilize their permits this year. Shandong Dongming Petrochemical Group, the nation’s largest independent refiner by capacity, said it plans to fully use its crude-import quota of 7.5 million tons in 2016, while Panjin North Asphalt Fuel Co. and Baota Petrochemical Group said they intend to import 7 million tons and 6.1 million tons, respectively.

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Best country for investors in 2015 may be the best in 2016 too

Victor Reklaitis

If you remember this past summer’s stock-market swoon in China, you might be surprised to see Chinese plays topping all others in an end-of-year ranking.

And some investors argue those investments could keep performing well in 2016.

An exchange-traded fund holding Chinese stocks ranks No. 1 in the list below showing 2015’s 10 top-performing foreign equity ETFs.

The Market Vectors ChinaAMC SME-ChiNext ETF CNXT, -0.09% — up 46% in the year to date — is joined by three other Chinese plays in the top 10, according to performance data from XTF.com as of Dec. 29. The Deutsche X-trackers Harvest CSI 500 China-A Shares Small Cap ETF ASHS, -0.54% is at No. 3 with its roughly 30% jump in 2015, and the PowerShares Golden Dragon China ETF PGJ, -1.68% and the KraneShares CSI China Internet ETF KWEB, -1.28% are both up about 20%, XTF.com data show.

Even with their sizable gains in 2015, these four ETFs haven’t attracted that much investor money, with each having less than $200 million in assets under management, according to ETF.com data.

2015’s 10 biggest winners among country ETFs
ETF name Ticker % gain YTD
Market Vectors ChinaAMC SME-ChiNext ETF CNXT 46.03
WisdomTree Japan Hedged Health Care ETF DXJH 38.01
Deutsche X-trackers Harvest CSI 500 China-A Shares Small Cap ETF ASHS 30.15
iShares MSCI Ireland Capped ETF EIRL 24.35
iShares MSCI Denmark Capped ETF EDEN 22.29
PowerShares Golden Dragon China Portfolio ETF PGJ 20.46
KraneShares CSI China Internet ETF KWEB 19.89
WisdomTree Japan SmallCap Dividend ETF DFJ 19.14
WisdomTree Japan Hedged SmallCap Equity Fund DXJS 18.08
iShares MSCI Japan Small Cap ETF SCJ 17.14
Source: XTF.com data as of 12/29/15 on all ex-U. S., country-specific, non-leveraged equity ETFs

Japan also makes a strong showing. The WisdomTree Japan Hedged Health Care ETF DXJH, -0.75% is at No. 2 in the list with its 38% rise in 2015, and other Japan funds take the last three spots in the top 10. ETFs for Ireland EIRL, -0.31% and Denmark EDEN, -0.01% round out the top 10.

“I think people will be surprised because the narrative doesn’t meet with the results.”
Brendan Ahern, chief investment officer at KraneShares, which runs KWEB and other China-focused ETFs
But overall, China looks like it was the best country for investors in 2015 — in this list, at least. This isn’t taking into account a wide range of problems, such as the volatile ride that investors focused on China endured in 2015, or the country’s unimpressive ratings for ease of doing business. The list just looks at year-to-date performance for all ex-U. S., country-specific, non-leveraged ETFs, using data for U.S.-listed funds from XTF.com.

Other roundups put Russia and even Jamaica on top in 2015. A Deutsche Bank note said Russian stocks performed the best, if you look at major asset classes in local currency terms. Bloomberg said Jamaican stocks beat the rest of the world, though the Caribbean nation “lives on the fringe of frontier status.” That explains why Deutsche Bank left Jamaica out of its roundup covering major markets. In terms of the performance of U.S.-listed ETFs, the biggest Russian play — the Market Vectors Russia ETF RSX, -2.42% — is roughly flat for the year, and there is no Jamaican ETF.

Investors might be astonished at how 2015 turned out for some Chinese stocks, said Brendan Ahern, chief investment officer at KraneShares, which runs KWEB and other China-focused ETFs. He suggested many ETF investors may have written off China, given that the two biggest plays — the iShares China Large-Cap ETF FXI, -1.61% and the iShares MSCI China ETF MCHI, -1.19% — are both losers in 2015.

“I think people will be surprised because the narrative doesn’t meet with the results,” Ahern told MarketWatch. “An investor just quickly looking, they’d say, ‘Oh, FXI and MCHI are down year to date. China is facing this headwind of tepid growth, which hurts manufacturing. I want to avoid China.’”

It is important to know what KraneShares has marketed as the “Tale of Two Chinas,” Ahern said. “Yes, the traditional part of the economy is struggling today,” he said, referring to the part tied to manufacturing and commodities. But investors focused on Internet firms and consumer-oriented companies should continue to see good results in 2016, according to the KraneShares executive. The ETF company has argued that such companies will benefit from Beijing emphasizing technology and domestic consumption. Analysts have made similar points about bets that line up well with the “new” China’s goals.

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Bigger, Bolder China in 2016

Efforts to project country’s economic and military clout around the world set to accelerate

By JEREMY PAGE

BEIJING—China’s efforts to project its economic and military clout around the world are set to accelerate as the country fleshes out plans for new trade routes between Europe and Asia in 2016 and tries to consolidate its grasp over disputed islands in the South China Sea.

With Beijing holding the rotating presidency of the Group of 20 nations next year, Chinese President Xi Jinping is expected to press ahead with his drive to challenge U.S. dominance of the global financial and security order.

That threatens to put Beijing increasingly at odds with Washington, although U.S. President Barack Obama, preoccupied by Russia and the Mideast, is expected to avoid a major confrontation with China in his final year in office.

One potential flash point is the South China Sea, where U.S. officials have said that American navy ships and planes will continue to patrol—roughly twice every quarter—near artificial islands China has built in the last two years.

Since the U.S. resumed those patrols in October, China has repeatedly denounced them as violations of its sovereignty and warned it will take all necessary countermeasures, but it hasn’t tried to physically block or expel U.S. vessels. Its capacity to patrol the area will be enhanced when it finishes much of its construction of airfields, radar stations and other facilities on the artificial islands.

“The islands aren’t growing out any more: They’re now growing up,” Gregory Poling, an expert on Asian maritime security at the Center for Strategic and International Studies in Washington, said in a recent podcast. “By which I mean China’s focused on building all the infrastructure—the buildings, the ports—that are going to be needed to make these functioning bases,” he said.

The potential for miscalculation is great: An American B-52 bomber, flying through bad weather, unintentionally strayed within two nautical miles of one of China’s artificial islands, U.S. officials said this month.

Another point of contention has been a court case brought by the Philippines—a U.S. ally—over China’s expansive claims in the South China Sea. The international tribunal in The Hague is scheduled to make a final decision around June.

Tensions over Taiwan, an old irritant to China-U.S. ties, risk flaring up again with the anticipated victory of an independence-leaning candidate in a presidential election in January. Beijing sees the island as a renegade province but Washington is obliged by U.S. law to help defend it.

Cybersecurity attacks, a more recent strain in relations, were tackled this year with a new dialogue mechanism agreed upon in September. Next year will test how quickly Beijing carries out investigations of past attacks, or how well the mechanism manages allegations of fresh attacks. U.S. officials say sanctions remain an option.

Both China and the U.S. have sought to play down tensions over the Asian Infrastructure Investment Bank, or AIIB, which Beijing established this year as a counterpart to the U.S.-dominated World Bank and Japan-dominated Asian Development Bank.

The AIIB is due to dispense its first loans in 2016, providing the first indications of whether it will complement existing institutions, as Beijing says, or undermine international governance standards, as Washington fears.

The Chinese government is also expected to unveil several new infrastructure projects as part of its much-vaunted “One Belt, One Road” program to build new trade and transport links between Asia and Europe.

While Washington has welcomed Beijing’s plans to finance infrastructure in the developing world, U.S. officials remain wary of China’s strategic goals and are closely monitoring its efforts to secure staging points for its military overseas.

One potential area of friction in the coming year is the East African nation of Djibouti, where the U.S. has a large military base and where China confirmed last month that it was seeking to build its first overseas military outpost.

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