Chinese-European Leasing Opportunities Highlighted at Beijing Summit
Written by Brian Rogerson
Thursday, 15 July 2010
The China Leasing Summit 2010 took place in Beijing last week. Previous leasing summits in China have attracted a mix of Chinese lessors, Western lessors already there, aspiring lessors from Western countries, manufacturers and vendors from both the home market and overseas and of course a collection of advisors, software houses, etc.
China Leasing Summit 2010 (Summit) comes at a time when there are major questions about the overall global recovery. With signs of a possible further global slowdown having the potential to dampen demand for manufactured goods, together with some massive wage settlements (up to 50% in some cases) threatening to rock China’s spectacular economic growth, it is essential that the Chinese government manages to maintain the right balance of tweaking the economy to gain just the right amount of slowdown.
Chinese leasing up 61% in 2009
Despite the global economic downturn The Chinese leasing market recorded massive annual growth of 61% in 2009, albeit from a low base. In 2010, the leasing industry is so far enjoying further significant development with a sharp increase in demand for construction equipment, transportation, medical equipment, IT and other assets.
Nevertheless, there are ongoing challenges and problems, which should see an improvement during the course of 2010. These issues include VAT reform; the registration and tracking of leased assets; the identification of experienced partners; effective credit evaluation and determination of leasing “price”; and the management of second-hand equipment.
Challenging issues
Alan Leesmith of The Alta Group and Derek Soper of IAA-Advisory both attended the Summit to give a joint presentation aimed at raising some challenging issues. The objective was to actively engage the audience in the debate. Both are frequent visitors to China, willing to share their expertise and knowledge of major global leasing markets - given that the Chinese leasing industry will inevitably expand and grow beyond its borders.
China is the world’s largest exporter of goods, with almost 50% of those exports being machinery and transport and ideal for leasing. European Union (EU) imports from China have been growing at an average of 16.5% each year since 2004, although that growth rate did drop to 13% a year in 2009 due to the general global economic downturn. The latest figures released in June by the EU show that the EU is now the largest importer of finished goods from China importing a massive €215bn in 2009.
These are figures Leesmith and Soper highlighted in their presentation - along with the fact that one fifth of all global trade is attributable to the EU. Emphasis was placed on the opportunities this provides for the many Chinese manufacturers that export into the EU, as well as into other major markets.
Action during Summit
They quoted as an example, Zoomlion Engineering, a Chinese crane manufacturer that has established leasing operations in numerous Western countries. A director of Zoomlion was unable to make his scheduled presentation at the conference due to the fact that whilst it was taking place the company announced a $1.5bn initial public offering (IPO) on the Hong Kong market and any public speaking was therefore not permissible.
Leesmith and Soper then went on to stress the increasing significance of the manufacturers’ captive sector, drawing on their expertise as administrators of the proactive Captives Forum (The Forum of Manufacturer’s Sales Finance Companies), the formal trade association of manufacturers’ leasing/finance companies. They explained the opportunities, challenges and issues facing Captives which the Captives Forum addresses and how it may be of interest to Chinese manufacturers.
The third part of their presentation related to results of a survey, undertaken by IAA-Advisory, of leasing company chief executives (CEO) across a range of world-wide bank-owned, independent and captive lessors to identify what the CEOs saw as the most important subjects in discussions with their parent companies. The items that the survey uncovered and which were the subject of discussions were: - What capital, what product? distribution and customer retention, reducing costs, liquidity in the markets, relevance of leasing to banks, manufacturers, vendors and customers. Also choosing geographies, succession planning (where will the next leaders come from?) and restoring confidence. This wide range of topics led to some interesting and wide ranging views.
Alan Leesmith is principal and director at The Alta Group and secretary of The Forum of Manufacturer’s Sales Finance Companies. Derek Soper is chairman of IAA-Advisory and director of The Captives Forum.
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Written by Brian Rogerson |
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Thursday, 15 July 2010 00:00 |
