#1 ASTRA-ZENECA BUYS 100% OF CHINA
#2 CHINA WORLD’S NO 1 CAR EXPORTER
#3 CHINA’S NEW CRUISE SHIP
#1 ASTRA-ZENECA BUYS 100% OF CHINA
GOOD MORNING FROM LONDON
THE FINANCIAL TIMES
AstraZeneca is set to make one of its first acquisitions in China, announcing plans to acquire Gracell Biotechnologies for up to $1.2bn to increase its investment in cell therapies for treating cancer. The Anglo-Swedish drugmaker has been trying to use its status as one of the largest drugmakers in China by sales to hunt for potential deals. But, like rival large pharmaceutical companies, it has mainly signed licensing agreements for particular drugs, rather than outright acquisitions.
Under the terms of the deal, AstraZeneca will acquire all of Gracell’s fully diluted share capital at a price of $2 per ordinary share in cash, plus $0.30 per share more if it hits a regulatory milestone. This would lead to a transaction value of $1.2bn, an 86 per cent premium to the company’s share price on December 22. The deal is expected to close in the first quarter of 2024.
Earlier this year, Pascal Soriot, AstraZeneca’s chief executive, expressed excitement about the “explosion” of biotech companies and innovative science in China after a tour of the country. He insisted the market was “completely open” for investment from multinationals such as AstraZeneca, adding that the pharmaceutical industry did not suffer from the same kind of “tensions” with China faced by other sectors because of its geopolitical rift with the US.
The Chinese biotech industry is also attracting attention from other foreign drugmakers. GSK signed three deals this year with Chinese companies, two licensing assets and another distribution agreement. William Cao, Gracell’s chief executive, said it was looking forward to working with AstraZeneca “to accelerate our shared goal of bringing transformative cell therapies to more patients living with debilitating diseases”.
GRAHAM PERRY COMMENTS;-
So what is the significance of this item of news? It is that AstraZeneca is buying 100% of a Chinese company in China. China always envisaged – from 1979 when Deng Hsiaoping first embarked on its new economic policy – that there would come a time when foreign companies would be permitted to buy 100% of the capital of companies in China. But China knew it would take time. Much needed to be done to modernise China before the country could sell off Chinese companies to foreign buyers.
This is now happening and the AstraZeneca deal sends an important message to the rest of the world. China is so confident of its future that it can allow foreign companies to take over 100% of the share capital of Chinese companies.
Under the Gang of Four regime, such a development was prohibited because it would suggest that China had surrendered its independence. Not so, says Xi Jinping’s government. It is part of the evolution of cross-boundaries business. It makes business sense for China to buy 100% of UK companies and it makes business sense for foreign companies to buy 100% of Chinese companies. It is a sign of China’s strength – not China’s weakness.
#2 CHINA WORLD’S NO 1 CAR EXPORTER
NIKKEI ASIA
“China is on track to become the world’s top automobile exporter on an annual basis for the first time, thanks to bigger footholds in Russia and Mexico and a growing global electric vehicle (EV) industry.
China exported 4.41 million autos from January to November, up 58% from the same period last year, according to preliminary data from the China Association of Automobile Manufacturers (CAAM).
That puts it ahead of former export leader Japan, which saw a 15% rise to 3.99 million autos in the first 11 months of the year. Japan’s full-year total is expected to come in at around 4.3 million.
China aims to become an automotive powerhouse, and sees the global shift to EVs as a way to achieve that goal. Also providing a boost to Chinese exporters is the Russian market, where Japanese and Western automakers’ withdrawal has been a boon for their Chinese rivals.
China exported 730,000 vehicles to Russia in the January-October period, seven times as many as a year earlier. After Russia, the second biggest gainer in Chinese exports is Mexico, where the volume climbed 71% to 330,000 vehicles. Chinese automakers are looking to build a customer base in the country to serve as a foothold for an eventual expansion into the U.S. and Canadian market
Tomoyuki Suzuki, managing director at U.S. consulting firm AlixPartners, sees state subsidies as a major factor in Chinese automakers’ competitive advantage in exports. “The massive infusion of subsidies by the Chinese government has expanded the supply chain for automotive manufacturing and sales across the border,” said Suzuki.
GRAHAM PERRY COMMENTS;-
This is significant news. It is evidence again of China’s progress at a time when the country is weathering the storm of big problems in its property sector. China is handling the crisis well as it contains the damage done to the country by the failings of two of its property giants – Evergrande and Country Garden.
Some commentators see only the bad news, just as other commentators see only the recovery indices. The future, however, is a mix of the immediate future and the long term future. No question, China has taken a hit because of the big accumulated debt in the property sector and this has hampered China today. Its growth rate has been marked down and there will be consequences across the board. At the same time there are important plusses that provide confidence going forward and one of the areas providing confidence in the future is the surge of growth in China’s automotive sector. Another is Huawei’s big bounce back.
As China moves forward there is good news to balance out the bad news. But each reader has to make up his own mind. China’s opponents want China to fail and talk up the property slump and the slow recovery from Covid but they do have an agenda and a Communist Party led by China, they hope, will founder and fail. But China has resilience and experience and talent. It learns from its mistakes. The bounce back after the failure of the Cultural Revolution has given confidence to its people and there is good reason, looking ahead, to see China emerge revived, confident and hard-working.
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#3 CHINA’S NEW CRUISE SHIP
THE FINANCIAL TIMES
China’s dominance in global shipbuilding — mostly container ships, bulk carriers and tankers — has been buoyed by state subsidies, vast shipyards, lower labour costs and Xi Jinping’s determination that the country move up the value chain amid trade tensions with the US.
But a handful of European shipbuilders have a competitive edge in niche markets such as cruise ship construction. The manufacturing of cruise ships is seen as more complicated because of the complex design, assembly and the need to ensure passenger comfort and safety. “China has many advantages for cruise ship construction . . . [which] typically involves state subsidies and China is well placed to mobilise quickly and at scale,” said Brian King, a tourism and hospitality professor at Texas A&M University.
With just 40mn outbound trips in the first half of 2023, Chinese tourism has yet to rebound to near the level of 2019’s 155mn trips. In 2019, some 2mn Chinese tourists took a cruise, compared with 14mn people from the US, according to the Cruise Lines International Association, an industry trade body.
China’s first domestically built large cruise ship is to embark on its commercial maiden voyage. The 135,500-tonne Adora Magic City, commissioned by a joint venture between the China State Shipbuilding Corp and US-based Carnival Corp, will set sail on Monday from Shanghai for South Korea and Japan before returning seven days later.
With more than 20 restaurants and bars, indoor palm trees, a theatre seating nearly 1,000 and a 2,000 sq m shopping centre, the ship has 16 floors and can carry 5,246 passengers, according to its builder CSSC’s Shanghai Waigaoqiao Shipbuilding. Industry insiders have previously said that more than 80 per cent of tickets have been sold for its inaugural voyage.
King, said it signalled “tangible evidence” of technological advancement alongside a “large scale and increasingly sophisticated” consumer travel market in China.
GRAHAM PERRY COMENTS;-
The constant focus by critics of China on China and its politics can lead to an imbalance in information flows about China and the overlooking of key markers of China’s development. In this context it is good for observers to be reminded of progress in non-political areas and the maiden voyage of the 135,000 tonne Magic Adora City falls into this category.
China excels in global shipbuilding but lags behind European shipbuilders for cruise ships. It is timely, therefore, that China’s Magic Adora City is about to make its maiden voyage.
The voyage is a breakthrough moment for China as demand for cruises shows that despite much that has been written about China’s economic difficulties, there is evidence that the well-to-do in China are willing to spend their money on luxury cruises.
“It will take at least a decade for the Chinese cruise operators to build up [their] fleet and develop service capability to match established western ones,” said Kun Cao, senior manager at consulting firm Reddal but China is on the move and the surge in growth of Huawel mobile phones and the rapid expansion of Electric Vehicle sales worldwide reminds us that when China sets its mind on a goal – achievement is most likely to follow.
GRAHAM PERRY
