M.R. Henderson

China’s $585 Billion Renovation

On WCC: I would want to know over the past few years what percentage of WCC sales have been to infrastructure projects before I considered cement after the last eight years of booming cement. Will infrastructure increases make up for the declines in property and manufacturing? Fixed asset investment in China 2007: 24% property investment, 30% manufacturing, 30% infrastructure. What companies beside Microsoft are increasing their investment in China? Apartment sales are slowing as prices are falling; how deep this goes remains to be seen, but few are brazen enough to be starting new property projects. And there has been a lot of building here. A Bank of China manager gave us a tour of an empty skyscrapers built just to improve property values. He said this has been done all through China to help prices. What would happen if these building managers started renting space on the sly?

As for a railway service provider from Guandong? That's the area hit hardest by the manufacturing slowdown so far. After this company is done shipping all the workers home, they aren't gonna be carrying more freight than they did last year. And with newly launched competition?

The last company mostly builds railroads. I invested in them after the Nigeria contract came up for renegociation, but this new developement that Beijing wants already strapped local governments to pay 3/4 of the BOLD infrastructure stimulus makes me worry that instead of helping a railroad builder, this package could saddle them with more debt.

From the FT: Beijing offers just quarter of stimulus funds
By Geoff Dyer in Beijing
Published: November 14 2008 23:35

Mu Hong, vice-chairman of the National Development and Reform Commission, a government economic planning agency, said Beijing would increase spending by Rmb1,180bn ($172bn, €136bn, £116bn) over the next two years – leaving local governments, state-owned banks and companies to provide the rest of the new funds.

If there's a way to create problems with the rapid ramp up of this "stimulus", I would say Beijing found it.