Welcome to the December issue of the Long Circle e-newsletter! We start this month by looking into data which shows China's mobile communications business accounted for more than 60 percent of the total telecommunications industry income in the first nine months of 2009. Second, we analyze the findings from FinanceAsia's third annual survey on M&A activity. Third, we focus on a report from PricewaterhouseCoopers which says Shanghai's economy is projected to grow the strongest by 2025. And finally, we look at a VC fund worth 9 billion yuan created to support China's high-tech sector.


December 2009


  • Mobile Phone Use in China Surges to New High
  • Asian M&A: The Days of Dealmaking are Back
  • Shanghai's GDP Seen to Grow Strongest by 2025
  • High-tech sector gets VC funds of US$1.3b

  • Mobile Phone Use in China Surges to New High

    China's mobile communications business accounted for more than 60 percent of the total telecommunications industry income in the first nine months of 2009, compared with 55.58 percent a year ago, according to the Shanghai Daily. This represents a record high since the country started to collect such figures a decade ago.

    The portion of fixed line income fell 4 percentage points year on year to 28.2 percent from January to September, said the Ministry of Industry and Information Technology. "The mobile substitution (of fixed line) will continue in the domestic market because of the lower and lower mobile rate and the development of 3G," Sandy Shen, a telecom analyst at IT research firm Gartner, is quoted as saying.

    In Shanghai and Beijing, the mobile penetration rate has surpassed 100 percent by the end of last month, which means each citizen has one or more handsets on average. China Mobile and China Unicom have launched mobile payment services which can be used as "mobile wallets" to pay public transport and World Expo tickets.


    Asian M&A: The Days of Dealmaking are Back

    FinanceAsia's third annual M&A survey confirms that the specter of recession is lifting and the days of dealmaking are back. As reported in Businessweek, the survey in September asked 214 professionals in the financial services industry for their views on M&A activity for the next 12 to 18 months.

    Two-thirds of our respondents expect cross-border outbound M&A deals by Asia-Pacific acquirers and intra-Asia Pacific M&A to increase from last year. However, respondents are less bullish on inbound M&A into Asia-Pacific, with 57% expecting it to either decrease on previous years or stay at similar levels.

    "The expected influence of Asian corporates on outbound and intra-Asian M&A reflects their growing significance and confidence," Roger Denny, head of M&A for Asia at Clifford Chance, is quoted as saying.

    For the third year in a row our respondents expect Greater China to be home to the majority of acquirers and investors during the forecast period.

    "Chinese acquirers are certainly more savvy in approaching deal situations compared to just a few years ago," Brian Gu, head of Greater China M&A at J.P. Morgan, is quoted as saying. "At the same time, target companies around the world are viewing Chinese interests as more credible and with a more welcoming attitude."

    Shanghai's GDP Seen to Grow Strongest by 2025

    Shanghai's economy is projected to grow the strongest among the top 30 cities globally by 2025, PricewaterhouseCoopers LLP said in a recent research report.

    The city is set to rise from 25th to 9th place in the global city rankings in terms of gross domestic product from 2008 to 2025, PwC said. Shanghai's economy is projected to top US$692 billion in terms of purchasing power parity, the accounting firm said. Purchasing power parity calculations eliminate the differences in foreign exchange and price levels between countries.

    "Global economic activity is concentrated in the world's largest cities," John Hawksworth, head of macro-economics at PwC is quoted as saying. "Looking ahead to 2025, the study sees the rise of the emerging economy cities continuing."

    Between 2008 and 2025, cities such as Shanghai, Beijing and Mumbai are projected to grow at about 6 to 7 percent per annum in real terms, whereas New York, Tokyo, Chicago and London are set to grow only at around 2 percent annually on average.

    Shanghai has jumped into the top 30 tier with its strong growth between 2005 and 2008, PwC said. In 2008, Beijing ranked 38th while Guangzhou in south China ranked 44th.


    China's High-tech sector to get VC funds of US$1.3b

    The Shanghai Daily reports China's top economic planner recently said it had launched a venture capital funds reaching 9 billion yuan (US$1.3 billion) jointly with several provincial and city governments as well as private investors to support the country's growing high-tech sector.

    Investments will focus on electronic and information industries, the biological and pharmaceutical sector and environmental and energy-related projects, the National Development and Reform Commission (NDRC) said.

    The NDRC said that governments in Shanghai, Beijing, Jilin, Anhui, Hunan, Chongqing and Shenzhen had joined the venture capital scheme.

    "The purpose of setting up the funds is to direct capital to invest in competitive high-tech enterprises and to improve their capacity for innovation," a statement said.

    The money will be spread among a total of 20 venture capital funds. The central government contributed 1 billion yuan, local governments pitched in 1.2 billion yuan, and the remainder came from private investors.