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China Briefings

Reports on China issued by Samsung Economic Research Institute

China Business Intelligence No. 123

China Business Intelligence No. 123

Samsung Economic Research Institute Beijing Office

July 2, 2009

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Highlights:

I. Economy

During the first quarter of 2009, electricity usage fell in China but industrial production and gross domestic product increased. The contradictory results have sparked suspicions. According to the Chinese government's claim, the wide gap between GDP growth and electricity usage stems from industrial restructuring. There is a possibility that the sample surveys on China's GDP and industrial production caused statistical errors. The Chinese government needs to ensure fairness and objectivity of its statistics by improving statistical survey method.

II. Industry

The current global financial crisis provides Chinese companies with new overseas M&A opportunities. As the financial crisis spreads to the real economy, a large number of western companies are facing difficulties with declining asset prices and lack of funds, creating a better atmosphere for potential acquirers. The latest moves taken by Sichuan Tengzhong Heavy Industrial Machinery Co. and Geely are drawing different responses from market watchers. The evaluation on Geely's acquisition of 100% stake in the Australian automatic transmission maker DSI has been positive, while Tengzhong's acquisition of Hummer, an off-road vehicle brand of GM, was seen to be abrupt and negative.

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