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with sewage, and heavily polluting industries, like iron and steel, will need to meet higher emission standards. Clean energy will play a greater role in our daily lives, while refuse will have to be disposed of in a fashion less harmful to the environment.
Meanwhile, the construction sector will also face new requirements for more energy-saving materials. This will have an enormous impact on a number of other areas. Companies that save energy--just like those that protect the environment--will see new demand for their products or technology.
Over the medium term, the stock market will also create a favorable environment for investors. Natural gas stocks, for example, are now priced low but have solid prospects. Since the second half of last year, the reform of prices for the nation's natural resources has gained widespread attention. The National Development and Reform Commission raised the price of natural gas at the end of 2005, and future prices of clean energy can be expected to rise further. These price hikes have helped the companies and the stock market. Over the next three to five years, the energy sector will be a focus of investment.
On the other hand, industries that are heavy consumers of energy will see their costs rise. Iron and steel is one sector that will have to pay higher costs to protect or replace our natural resources. If enterprises do not reach a sufficiently large scale, they may be unable to compete. That in turn will make mergers inevitable.
In manufacturing, consolidations will be more frequent. Manufacturers that rely on low cost energy will see their profit margins shrink. Companies with technology or equipment in the environmental protection field will see their markets expand considerably. At the same time, new forms of energy, such as solar power, will see growing demand. In the United States, the biggest IPO by a Chinese privately owned company was by the Wuxi-based Suntech Power Holdings Co. Ltd. (NY: STP), which made its name in new energy sources.
Enterprise
Wang Yukun (Director of the Enterprise Department of the Capital Steel Development Research Institute): In 2005, Chinese companies made significant strides in globalization. But China's advances have had some unwanted side effects. If a company is said to be of interest to China, speculators move in quickly. That raises the value of the assets and ultimately increases the cost to China.
I believe that globalization does not have to be achieved only through mergers and acquisitions. Last year there were only a handful of Chinese companies that actually succeeded in using this method. China National Petroleum Corp. was one exception and it succeeded because it held to a core value of "letting others benefit from one's own development."
This is a lesson for other companies. By sharing the benefits with others, we take an indirect path. If we look at Huawei Technologies, they are clearly using this formula. They have formed strategic alliances with Nokia, Ericsson, Siemens, Cisco, GE, Microsoft, IBM, Sony, Alcatel and 3Com. We could call this "borrowing a boat to go to sea." This indirect path strategy allows Huawei to make the most of the strengths of its partners. And in turn its customers become aware of the Huawei brand.
(Xinhua Finance)
DISCLAIMER: The information contained herein is based on sources we believe to be reliable, is provided for informational purposes only, and no representation is made that it is accurate or complete. This briefing should not be construed as legal, tax, investment, financial or other advice, and is not a recommendation, offer or solicitation, to buy or sell any securities whatsoever.
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