In this edition:
--A growing number of Chinese financial institutions have come to Africa to seek new opportunities. It's believed that Chinese investment has impacted on a wide range of trades and helped diversify the region's local economies;
-- US retailing giant Wal-Mart are taking a controlling stake in Chinese e-commerce firm "Yihaodian". Will a similar approach be taken by other international retailers as they attempt to become multi-channel retailers, and will online supermarkets become a common phenomenon as e-commerce continues to boom in China?
Stay tuned to this edition of "Biz China" to hear details on these stories and more!
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With initial funding of one billion US dollars, the China Africa Development Fund is the flagship of China's equity investment in Africa. Since its establishment in 2007, the fund has played a positive role in bringing more Chinese investment into the African continent.
Rpt:
The China-Africa Development Fund is the brainchild of the China-Africa Cooperation Summit held in November 2006 in Beijing. Lv Zhengyi,chief representative of the fund's first branch in South Africa, gives an overview of what the Fund is.
"The China Africa Development Fund is meant to give openings to Chinese investors in Africa, and Africans that want to partner with Chinese. The fund has a target size of 5 billion to be reached in phases, with the first-phase funding of $1 billion provided by the China Development Bank. The fund's investment focuses mainly on the processing industry, including construction materials; automobiles; and household electrical appliances; in addition to agriculture, mining, and infrastructure areas."
Lv Zhengyi talks about why South Africa's capital city of Johannesburg was chosen to set up the fund's first representative office:
"South Africa is the biggest economy in Africa, accounting for over one fourth of the continent's total economic output. Johannesburg has long been serving as the economic and financial center in the sub-Sahara region; over 85 percent of the financing activities of the region are completed through Johannesburg. Besides large international financial institutions, major banks from China, such as the Construction Bank of China, the Bank of China and the Industrial and Commercial Bank of China, all have branches or representative offices in Johannesburg, which opens the gateway for Chinese investment in Africa. "
Lv says so far, the fund has set up offices in South Africa, Ethiopia, Zambia and Ghana. As a financial investor, the China Africa Development Fund has to compete directly with sophisticated financial institutions from Europe and the United States and it's very important to have sound local knowledge.
The Rand Merchant Bank of South Africa is a business partner of the China Africa Development Fund, providing consulting services and helping the fund find investment projects.
Erwin Pon, a senior project supervisor from the Rand Merchant Bank says the China Africa Fund is well positioned in the African market:
"The China-Africa development Fund will be the catalyst¡ it will be the one that will assist the Chinese companies who come to invest here. They will develop their own experience and knowledge about Africa and will share the risk with you, helping you to come over¡"
Erwin Pon points out that Chinese investors need to do more self-promotion to make themselves better known by locals:
"They need also to work with the government to educate the people on the ground. ¡¡ If there are misunderstandings and they think that we are gonna invest here, and after three years go back to China, they are wrong. So we must address that. Say no, we actually have long-term views, we have long-term vision, spreading that word and promoting that ¡..and people will understand a lot more what you can do. "
China is now the biggest trading partner of Africa, and Africa is China's fourth largest investment destination. Statistics from China's Ministry of Commerce indicate that in the first three quarters of 2011, trade volume between China and Africa reached 122 billion US dollars, an increase of 30 percent year on year; in the meantime, China's direct investment to Africa exceeded one billion US dollars, marking an increase of 87 percent.
In addition to the increasing trade volume, a growing number of Chinese financial institutions have come to Africa in recent years to seek new growth opportunities.
Economic Professor Martyn Davis from University of Pretoria, says though the presence of Chinese financial institutions in Africa is small, the potential is huge:
"South Africa is dominated by sizable big corporations¡. Chinese institutions are still in their early days¡ So far the biggest impact has come from China Import and Export Bank. It has been extremely positive in terms of supporting south African infrastructure and resource restructuring."
Some western media have been critical about the deepening China Africa economic co-operation, calling it China's "new colonialism". Professor Davis says this claim is groundless.
"It's silly. I can give you a small example. Flying from Cape Town to Morocco, is about ten hours. To fly over to Singapore is about 5 minutes. How many Chinese companies are in Singapore? About 2-thousand and 5-hundred. The total of multi-national companies in Singapore is about 7-thousand, so about one-third foreign companies in Singapore are Chinese. In Africa, how many Chinese companies? Well, you got these small micro enterprises, but sizable companies, some people say one thousand, one-thousand five hundred¡ and people are saying new- colonialism, the Singaporeans call it foreign direct investment. Most of the comments of 'new colonialism' are coming from western commentators, who are not commercially-minded at all, but have investment interest in Africa. It's as simple as that."
The economist stresses that African people need foreign investment to improve their livelihood; it doesn't matter where the money is from:
"So the point about this new- colonialism debate is that 'capital is capital'. So money comes from Brazil, from France¡ who cares? Africa is so big for opportunity, there are plenty of opportunities in this continent for Indian money, for Brazilian money, for western money, for Chinese money, it doesn't matter where it's from, it is the opportunity for billions of people with extremely low living standards for the majority of the time."
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Wal-Mart , the world's largest retailer in terms of sales, has announced that it's taking a majority stake of Yihaodian, a popular Chinese website selling consumer items and groceries.
This fresh round of investment into Yihaodian will take Wal-Mart's stake to around 51 percent and is subject to government regulatory approval.
In a statement, Wal-Mart said that "e-commerce has been booming in China for years. It is a good investment for Wal-Mart as it has a lot of potential."
Heavy spending on logistics, waging price wars, holding steep discount promotions and splurging on massive offline advertising campaigns are what it now takes to be among the major e-commerce players in China and to stay at the forefront of consumers' minds. Wal-Mart says it's committed to investing in a key growth industry in China and developing all that which goes with it.
For more on Wal-Mart's expansion into the e-commerce sector, we spoke earlier with Ben Cavender, associate principal at China Market Research in Shanghai.
(conversation with Ben Cavander)
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Every day, some forty-million people in China search for videos on the Internet. Many are looking for what's known as Micro films, or weidianying in Chinese. Usually no longer than 20 minutes in duration, micro films mostly attract young people who are highly mobile and lead a fast-paced life. The huge market demand reveals that there is a need for Micro films within the film industry. But can this new online artistic genre invigorate the domestic film industry or is it destined to become just another tool for the advertising industry?
Rpt:
(sound from Jiangwen's micro film "football game" )
"Football Game" is the latest work of renowned Chinese actor and director Jiang Wen (½ªÎÄ). The five-minute micro film tells the story of a divorced middle aged man taking his estranged son to watch a football game. The film, though short, is imbued with Jiang Wen's artistic style and his personal perspective of the love that exists between father and son.
Released last May, the video has already been viewed 4 million times at the popular video sharing website, Tudou.com.
And Jiang Wen is not the only one to test the waters and venture into this exciting new genre of film. Well-known celebrities such as director Zhang Yimou, actor Jiang Wu, Zhou Xun and Karen Mok have all joined this developing trend.
Zhao Yurui, CEO of a Beijing-based Culture and Entertainment Corporation, says that micro films, in contrast to conventional films, are short, entertaining, interactive, and most important of all, micro-costly in terms of the budget required:
"Conventional films take a long time to shoot and famous directors and actors are usually required to ensure box-office revenues. Micro films are being seen as a fresh and fast alternative, and any unknown producer can make a Micro film and use the internet as a platform upon which to promote their work. Another good thing about Micro films is that they can be watched any time, and if you're using a 3G phone or other mobile devices, virtually anywhere!"
Serious competition within this new art form is starting to emerge across many Chinese websites.
Chinese Internet companies like Youku, Sohu, Tudou, and Sina, all have plans to shoot differently themed micro films. Shi Yu is the CEO of Ku6.com, a popular video website in China.
"Micro films have become a natural choice for China's video websites and for a number of film production institutions when they are searching for low-cost and highly-popular productions. This new entertainment form has been widely acclaimed by internet users since the moment they first came to light, with the click volume and the amount of times the videos are being forwarded continuously climbing. Money can be made through either product placement within the films, or by placing commercials at the very beginning when viewers click to watch a film."
Shi Yu points out that micro films have a clear advantage over conventional methods of advertising. As is well known, the cost for television ad time is extremely high. Purchasing a prime-time TV commercial slot can easily set a company back hundreds of thousands of RMB, even going into the millions in certain cases. However, for a micro film, the cost of advertising is low, the production cycle is short, and the release time is fast.
This has aroused heated debate among industry operators as to what direction micro films are heading in. Are micro films destined to develop into longer and more dramatic versions of advertisements?
The answer from professor Yu Jianhong with the Beijing Film Academy, is an emphatic "no"
"We think a micro film should be a film first and foremost, despite its short duration. It's supposed to tell an interesting story, to entertain people or inspire people to think. Of course, it's natural for advertisements to be implanted within micro films as these films are not shown in cinemas but rather distributed via social networks, such as micro-blogging. Film makers will have to strike a balance."
The expert points out that the development of micro films has only just begun. It is believed that with the growth of internet-supported technologies and new-generation consumers, micro films will thrive and play an important role in China's domestic film industry.
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That brings us to the end of this week's edition of "Biz China". For more business stories, please log on to our website at www.cribeyondbeijing.com, I'm Yao Yongmei, thanks for listening, until next week, goodbye!
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