Thai group thinks big in China – Financial Times

http://blogs.ft.com/beyond-brics/2010/07/12/thai-group-thinks-big-in-china/

Just as Jeffrey Immelt, the General Electric chief executive, and other foreign businessmen are complaining about the difficulties of operating in China, along comes a Thai company with plans for a multi-billion dollar investment programme in the Middle Kingdom.

CP group, the Thai company that was the first group to come into China in the post-Mao opening up, is ploughing in $2bn into a new real estate development in Henan, with similar-sized projects lined-up for Shanghai, Shandong and Guangzhou. The company intends to expand a 73-outlet hypermarket chain to 1000 over the coming decade. If that is not a vote confidence – and an alert to the competition, then it is hard to say what is.

With Rmb11bn in sales last year, CP is currently a distant fourth in a sector led by RT-Mart, which has sales of Rmb38.8bn or 10.7 per cent of the market, according to Euromonitor. Carrefour ranked second with Rmb33.5bn (9.2 per cent) with Wal-Mart was third at Rmb31.2bn (8.6 per cent).

The move highlights the long-standing links and growing links between China and its neighbours, especially those like Thailand with significant ethnic Chinese populations.

CP goes by the name Chia Group in China. This recalls founder Chia Ek Chor who left Guandong to seek his fortune in Siam during the early 20th Century. Now the company has more than 400 businesses and affiliates in ten Asian countries, employing over 250,000 in sectors such as agribusiness, real estate and telecommunications.

CP is gearing-up for the challenge of tapping into a vast market. China is seeking to increase domestic consumption with the tens of millions joining the country’s middle classes. More than 20 provinces and municipalities plan to increase minimum wages this year, according to China’s Ministry of Human Resources and Social Security, putting more money in people’s pockets. The breaking of the renminbi’s peg to the dollar means the currency is likely to appreciate, which should strengthen the purchasing power of Chinese consumers.

In the background, the China-ASEAN free trade deal came into being on January 1 2010, giving southeast Asian countries increased access to the Chinese market and furthering regional economic integration. China is planning to build road and hi-speed rail networks across southeast Asia, linking the Mekong river countries with its own southern and western province and thereby enhancing commercial links with the Chinese diaspora – including the affluent Thai-Chinese community.

China says it will plough some of its vast forex reserves into infrastructure development – such as the rail networks – along with soft loans for neighbouring countries, as was discussed at a meeting between China and ASEAN leaders in Thailand last October.

All this comes despite the recent difficulties of some big western and Japanese companies in China, including the strikes that hit Japanese car makers and Google’s licence problems. The message is clear – if western and Japanese investors start to get nervous, Beijing has alternatives.

According to UNCTAD, China is the third-largest recipient of global FDI, after the US and France. A World Bank report “Investing Across Borders”, released July 7, found that though China has some restrictive measures in place, this is offset by the sheer size of the country’s economy and population in the eyes of investors.

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