My recent trip to China was eventful for a number of reasons, one being how quickly, comfortably and efficiently my team and I could travel from one city to the next via high-speed train. I continued my tour of China with a stop in Wuhan, the capital of Hubei province. The city has three railway stations including a new high-speed, 11-platform station that opened in 2009, where we arrived. Many have compared Wuhan to the US city of Chicago because of its central location, its large industrial base and its importance as a major transportation hub. Situated at the intersection of the Yangtze and Han rivers, Wuhan offers connections to cities across China by road, rail and air. Wuhan has an ancient history spanning some 3,500 years, but got its modern name in 1927 when three older towns were combined—Wuchang, Hankou and Hanyang. Cementing Future Growth Wuhan boasts good infrastructure, including roads, railways, seven bridges and a tunnel across the Yangtze River. Given the tremendous building boom in the last 20 years, not only in Wuhan but in all of China, it is no surprise that production of cement used to make concrete (a mixture of water and natural elements such as clay, limestone or sand) has mushroomed. The Three Gorges Dam in Hubei Province required more cement than the entire annual production in the United Kingdom, and, if laid at a one-cubic meter level, the overall concrete used in the project would circle the earth three times.1 Construction started in 1994 and was completed in phases; today, the dam controls floods that had devastated the city in the past. The dam wasn’t the only project swallowing up a lot of cement. China consumed more cement from 2011–2014 than the United States has since 1900.2 In 2014, China produced enough cement to make 330 billion cubic feet of concrete, enough to cover New York City’s Manhattan Island with a 520-foot-thick block!3 My team and I arrived in Wuhan during the weekend, so we decided to take in the cultural and commercial sites to see what was happening in the city’s tourist and retail spaces. First, we visited the Hubei Provincial Museum with its impressive collection of over 200,000 artifacts, the most fascinating (in my opinion) items being ones from the tomb of Marquis Yi (ruler of Zeng), who died around 400 BC. The tomb was accidentally discovered by the People’s Liberation Army (PLA) in 1977 while clearing a hill to build a factory, unearthing many items reflecting the ruler’s life and death. The fact that we can now see these and other artifacts in almost pristine condition is remarkable. Strategically located, Wuhan’s importance to trade meant that when foreign powers were extracting concessions from China in the 19th century, the riverfront was divided into foreign-controlled merchant districts. Some of those old European-style shops and warehouses have been restored, serving as a unique “Han Street” shopping area and a backdrop for new high-rise hotels, office buildings and shopping malls. We enjoyed a few visits to Han Street among the crowds of Chinese shopping and eating in the various restaurants. While walking along the street we were given a flyer by a salesgirl in front of her “wealth management” shop. The flyer offered generous gifts for anyone who invested, and the potential returns that were promised were quite generous. While I thought such returns were probably too good to be true, I learned it was a “peer-to-peer (P2P)” operation; individual borrowers and lenders were matched up, with the company acting as an intermediary and providing credit and risk assessments. To us, this indicated just how fast China’s financial industry is expanding into the retail sector. Financial liberalization has also made headlines in China. That same day I read in the China Daily English-language newspaper about an underground bank that had been busted in Zhejiang province. The case involved RMB 410 billion (about US$64 billion) in an operation involving the registration of more than 80 shell companies in China and Hong Kong to operate foreign-exchange transactions and money laundering. Reading the details of the case gave us an idea of how the flow of money in and out of China takes place and how big the illegal flows are. China’s government has been working to reduce corruption and trace capital outflows, and thus has been cracking down on these types of operations. Walking in the busy shopping area, we passed a beauty parlor/barbershop with four floors packed with people, part of a chain with 200 stores in the city. My colleague Chris needed a haircut, and his barber offered him a special discount card where you pay upfront for future visits, a common way for businesses to drum up sales and finance expansion plans. Our next stop was the Hubei Museum of Art where we saw how China fit into the modern art scene with a number of eclectic exhibitions—some trends which I am not very excited about! One strange installation took up a whole room and consisted of bales of waste paper that the artist produced by slicing up his own prints. An exhibition I found particularly interesting at the museum was about the development of art in Wuhan from the start of the revolution against the Qing Dynasty. It showed how Western influence on Chinese art became important and how propaganda art was developed during the war against Japan. After visiting the museum, we headed for the city’s most famous tourist spot, the Yellow Crane Tower. Standing on top of a hill overlooking the Yangtze River, it’s about 51 meters (about 168 feet) high and has five floors with yellow-tiled upturned pagoda-type eaves, apparently designed to resemble a yellow crane spreading its wings. It was originally built around 220 AD but has been reconstructed many times since then. The tower’s current incarnation included an elevator for people who can’t—or don’t want to—struggle up the five floors to reach the top. I walked up for the exercise and it was quite a climb!...
Investment Adventures in Emerging Markets - Notes from Mark Mobius
Mark Mobius, Ph.D., executive chairman of Templeton Emerging Markets Group, joined Templeton in 1987. Currently, he directs the Templeton research team based in 15 global emerging markets offices and manages emerging markets portfolios. As he spans the globe in search of investment opportunities, his “Investment Adventures in Emerging Markets” blog gives readers a taste for what he does, when, where, why and how. Dr. Mobius has written several books, including “Trading with China,” “The Investor’s Guide to Emerging Markets,” “Mobius on Emerging Markets,” “Passport to Profits,” “Equities—An Introduction to the Core Concepts,” “Mutual Funds—An Introduction to the Core Concepts,” ”The Little Book of Emerging Markets,” and “Mark Mobius: An Illustrated Biography."
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