Manufacturing Industries in Dubai
This is a question that came up this week as part of an investigation process for setting up an investment fund looking at investing in China's new technology markets. It's also worthy of some time; after all property prices are raging just like in Dubai, everyone's saying that you "just can't lose in China" rather like Dubai, and so on. So what does make the two economies different and are there lessons to be learned from the Middle East's fallen star?
Manufacturing Industries in Dubai
What Makes China Different From Dubai? Isn't It the Same Bubble Story?
By Nick Kellingley
This is a question that came up this week as part of an investigation process for setting up an investment fund looking at investing in China's new technology markets. It's also worthy of some time; after all property prices are raging just like in Dubai, everyone's saying that you "just can't lose in China" rather like Dubai, and so on. So what does make the two economies different and are there lessons to be learned from the Middle East's fallen star?
Property
On the surface there's very little difference between the two countries, if you read press reports regarding rampant house price inflation. But underneath there's a huge division. In China you have 1.3 billion people many of whom are currently poorly housed, or live in conditions that would be unbelievable in the developed world. Whereas in Dubai you had a city consisting of 200,000 locals and 2 million expatriates (who can leave when they want to) trying to build for 4 million people, in the expectation that you'd want to holiday in the desert each and every year.
Lessons to be learned: Avoid investing in property in China's top tier cities, these are almost certainly over-valued at the moment and despite serious government interventions to try and correct the problem - there will almost certainly be a "bubble bursting" sooner or later. However there's still plenty of room for growth in less well known parts of the country for the foreseeable future. (Chinese development companies have been publicly changing their course for these cities too, so you'll be in good company).
Industry
Dubai went for a service sector based economy, with investment in manufacturing coming too little too late. In fact the next step for the country was to be massive research and development facilities and some large scale manufacturing too, sadly the financial crisis hit before this could be realised. With a strong internal economy based largely on expatriate debt and a necessary focus on exports due to the small size of the country there was very little flex to enable the UAE's second largest state to weather the storm.
China is in a completely different place; the country is all about manufacturing and has very little in the way of Tier 1 international service provision. The economy is almost certainly going to drop by a small amount while the Chinese manage the transition from "cheap and cheerful mass provider" to "higher value quality supplier". But in the long run the outlook's much better for the Chinese, and if the government succeeds in developing a strong internal economy - dependencies on exports can be reduced.
Lessons to be learned: Chasing the "quick buck" in China no longer makes sensible investment sense; the real gains are to be found in companies looking to harness the growing internal economy or greater levels of technology seeking to become world beating.
By Nick Kellingley
This is a question that came up this week as part of an investigation process for setting up an investment fund looking at investing in China's new technology markets. It's also worthy of some time; after all property prices are raging just like in Dubai, everyone's saying that you "just can't lose in China" rather like Dubai, and so on. So what does make the two economies different and are there lessons to be learned from the Middle East's fallen star?
Property
On the surface there's very little difference between the two countries, if you read press reports regarding rampant house price inflation. But underneath there's a huge division. In China you have 1.3 billion people many of whom are currently poorly housed, or live in conditions that would be unbelievable in the developed world. Whereas in Dubai you had a city consisting of 200,000 locals and 2 million expatriates (who can leave when they want to) trying to build for 4 million people, in the expectation that you'd want to holiday in the desert each and every year.
Lessons to be learned: Avoid investing in property in China's top tier cities, these are almost certainly over-valued at the moment and despite serious government interventions to try and correct the problem - there will almost certainly be a "bubble bursting" sooner or later. However there's still plenty of room for growth in less well known parts of the country for the foreseeable future. (Chinese development companies have been publicly changing their course for these cities too, so you'll be in good company).
Industry
Dubai went for a service sector based economy, with investment in manufacturing coming too little too late. In fact the next step for the country was to be massive research and development facilities and some large scale manufacturing too, sadly the financial crisis hit before this could be realised. With a strong internal economy based largely on expatriate debt and a necessary focus on exports due to the small size of the country there was very little flex to enable the UAE's second largest state to weather the storm.
China is in a completely different place; the country is all about manufacturing and has very little in the way of Tier 1 international service provision. The economy is almost certainly going to drop by a small amount while the Chinese manage the transition from "cheap and cheerful mass provider" to "higher value quality supplier". But in the long run the outlook's much better for the Chinese, and if the government succeeds in developing a strong internal economy - dependencies on exports can be reduced.
Lessons to be learned: Chasing the "quick buck" in China no longer makes sensible investment sense; the real gains are to be found in companies looking to harness the growing internal economy or greater levels of technology seeking to become world beating.
Nick Kellingley is the managing editor of China Strategic Monitor, http://www.chinastrategicmonitor.com
CSM is a newsletter and consulting service for finance and technology companies looking to invest in China. We offer insight into key verticals; New Energy, Automotive and Coal & Steel as well as bespoke reporting services and consultancy.
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