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        February 2005

with presence in US, China, & India, offers global sourcing services to the Heavy-Equipment OEMs in North-America.
      CONEXPO-CON/AG 2005

SourceGlobal® will be at CONEXPO-CON/AG 2005, March 15-19 in Las Vegas.  Stop by booth N-2700 which is located in the North Hall.  Please email if you would like to set up a meeting.  CONEXPO-CON/AG 2005 is the world's largest show for the construction and construction materials industries, showcasing the latest equipment services and technologies.
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China Flag
Chinese Economy Still Accelerating
Despite efforts by Beijing to cool down the growth of the Chinese economy, the Chinese economy grew by 9.5% in the fourth quarter of 2004.  On October 29th the Central Bank increased lending rates for the first time in a decade and appears to be poised to do so again along with increasing reserve requirements for banks.  The government has also issued numerous orders to halt construction, project approvals and land sales.  Clearly however these measures have been either ineffective thus far.  China has overtaken the US in consumption of grain, meat, coal, steel, fertilizer, television sets, cellular phones, and refrigerators.

Inflation appears to be under control as prices increased only 2.4% in December.  However inflation cannot be staved off forever with simple interest rate increases.  At some point revaluation of the currency will have to occur.  Chinese leaders have made it clear they are in no hurry to revalue the currency though they recognize that they will have to do so eventually.  Chinese officials intend to keep the economy growing at around 8% per annum and intend to gradually adjust the dollar peg, currently at around 8.25.

For additional detail:
Beijing May Expand Efforts to Cool Economy
China in No Hurry to Revalue Currency
China Leaves US Behind as World's Top Consumer
China Sees Sweltering 9.5% Growth
Counterfeit or Real?
One can already purchase the next Harry Potter book in China.  Not written by or even translated from the work of JK Rowling mind you, but it is available.  One of the biggest challenges to doing business in or with China is the prevalence of counterfeiting.  Many firms, both domestic and multi-national, are hesitant to invest in China due to the risk of having their products stolen and knocked off.  Even automobiles, motorcycles, drugs, and high tech electronics are not immune to knockoffs.  Some knockoffs are so good they are hard to distinguish from the originals, though products with a significant amount of technology in them are hard to reproduce perfectly.  Even an imperfect copy can cost sales however. 

The scale of the counterfeiting is impressive.  Recently officials seized over $5 million worth of equipment from a plant making Louis Vuitton knockoffs.  A recent Businessweek cover showed two motorcycles, one an authentic Honda and the other an eerily similar Chinese copy.  The US Chamber of Commerce is on record stating that China has made "limited progress" in 2004 towards meeting its WTO obligations to enforce trademarks, patents and copyrights.

For additional detail:
By Fighting Fakes, China Wins Too
The Great Call of China
Fighting the Fakes

Quick Facts

China Infrastructure

Internet Users

94 Million

Railways 70,058km

Roads 1.4MM km

Gas Pipelines

Oil Pipelines

Paved Airports

Merchant Marine
1,850 ships (1000GRT or over)

263 million

Cell phones
269 million)

Source: CIA World Factbook  

India Flag
India, Inc.

While China gathers much of the press, India has quietly had a fantastic 2004.  Sales of the top 1000 companies in India rose 16% with net profits improving over 60%.  Out of 68 manufacturing sectors only 6 reported low or negative growth.  The number of credit upgrades rose 21% year over year in manufacturing, financial services and infrastructure.  Much of the growth seems to have come from small to mid-cap companies whose operating profits grew nearly twice as fast as their larger breatheren.

Much of the credit for these phenomenal results stems from a series of market reforms over the last five years.  It's not clear however if this sort of growth rate is sustainable without reform in the government's fiscal policies.  Currently resources are being poured into paying for the deficit that would be better utilized in infrastructure improvements which promote economic growth. 

For additional detail:
India Inc. On a Roll
India Manufacturing Sector Records Higher Exports
India Inc's Year of Breaking Records
Moody's, India Inc. Caution Government on Fiscal Deficit

Mergers and Acquisitions Are Back

M&A is back and not just in the US.  India and China have been hotbeds of acquisition activity of late.  In January of 2004, the Indian government raised the $100 million cap on investment in foreign investment by Indian companies to the net worth of the the company.  As a result, Indian firms acquired over 75 companies outside of India before mid-2004 and the activity has only increased since.  One of the major industries, business process outsourcing, also appears to be in the midst of a consolidation wave.  Most BPO acquisitions are from large consultancies such as Accenture, Cap Gemini and IBM. 

For additional detail:
India's Great Global Takeover Game
Outsourcing's Acquiring Minds

Quick Facts

India's Global 500 Companies

IndiaOil 189
$25.3BB Revenue

Bharat Petro. 450
$12.1BB Revenue

Hindustan Petro. 462
$11.7BB Revenue

Reliance Indust. 482
$11.3BB Revenue

Source: Fortune
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