China’s economy shows further weakness as retail sales struggle

Chinese retail sales expanded 7.2 percent last month, well off the 8.4 percent tipped by economists and a big drop from March. (AFP)
Updated 15 May 2019
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China’s economy shows further weakness as retail sales struggle

  • Authorities have been attempting to transition the world’s number two economy from being reliant on state investment and exports to a more stable one
  • The readings fanned speculation that authorities will unveil another round of pump-priming measures

BEIJING: China’s economy showed further signs of weakness in April as the slowest growth in retail sales for 16 years highlighted the task leaders have in ramping up domestic demand at the same time as fighting a painful trade war with the US.
Authorities have for years been attempting to transition the world’s number two economy from being reliant on state investment and exports to a more stable one driven by China’s huge army of consumers, with the tariffs stand-off reinforcing the need for such a change.
But the latest figures on Wednesday show retail sales expanded 7.2 percent last month, well off the 8.4 percent tipped by economists in a Bloomberg News survey and a big drop from March.
The figures from the National Bureau of Statistics (NBS) represent the worse pace since 2003, at the height of the SARS crisis.
The bureau also said growth in industrial production slowed sharply to 5.4 percent from, while fixed asset investment in the four months to April rose 6.1 percent. Both missed Bloomberg estimates.
The readings fanned speculation that authorities will unveil another round of pump-priming measures — having wound back on such stimulus in recent weeks following signs of a bounce in the economy — with Shanghai’s composite index jumping more than one percent Wednesday.
Beijing has rolled out huge tax-cuts and other measures this year to ramp up the economy and offset the impact of a trade war that has seen the US impose tariffs on hundreds of billions of dollars worth of Chinese goods, causing worries for exporters.
However, while leaders will want to prevent the economy from taking a bad hit, Julian Evans-Pritchard of Capital Economics was skeptical about how much they will do.
“With the scale of stimulus likely to remain smaller than in previous downturns, we don’t anticipate a strong recovery,” he said.
On a brighter note, Betty Wang, an economist at ANZ bank, said in a research note that property investment had picked up over the first four months of the year thanks to “a big jump in developers’ funding conditions,” with bank loans, down payments and mortgages all growing at a quicker pace.


INTERVIEW: Sam Darwish, Group CEO at IHS Towers - the accidental engineer who found his calling

Updated 29 min 29 sec ago
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INTERVIEW: Sam Darwish, Group CEO at IHS Towers - the accidental engineer who found his calling

  • The CEO has made it big in telecoms, in a career shaped early on by Lebanon’s bloody civil war

For some, student survival means merely coasting along at university in the hope of bagging a 2.1, as well as invites to as many parties as possible.

For telecoms executive Sam Darwish, however, survival took on a more literal sense, having embarked on his studies in the dying days of the Lebanese civil war.

Teenage life was tough for Darwish, who is now 47 and a US citizen. Growing up in Beirut in the 1980s meant a constant backdrop of violence —  “there were many wounded,” he said — plus the daily struggles of putting food on the table and regular electricity blackouts.

But it was this experience that taught Darwish a certain “pragmatism” that he continues to put to use today as chief executive of telecoms company IHS Towers, which has to date raised more than $5.5 billion in funding.

Sitting in the IHS office in London’s plush Mayfair district, Darwish recounted how, when he was a student, his father would give him a small sum of money each day. He could either use it to take public transport to the American University of Beirut campus — or buy lunch, and risk the walk through the war-torn streets.

“Decisions like that make you pragmatic. It makes you solution-orientated. It makes you appreciate what the basics in life are,” said Darwish.

“You need just to survive. You need to find a solution. Electricity would disappear for a few days, then people started charging their batteries in their cars, and at the end of the day remove the battery to put on a light or small TV,” he added.

“It taught me to not take anything for granted. You needed to think and rethink every little thing that exists.”

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BIO

SAM DARWISH

•47 years old

•US citizen, grew up in Lebanon

•Married, three children based in US

EDUCATION

•Bachelor’s engineering degree in computer communications, American University of Beirut

CAREER

•Network chief engineer, Libancell, Lebanon

•Vice chairman, director of projects, Lintel

•Deputy managing director, CELIA Motophone, Nigeria

•Co-founder, IHS Towers

OTHER INTERESTS

•Founder, Singularity Investments

•Founder, DAR Properties

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This practical attention to detail — along with an awareness of the importance of finance, power and security — are very much required in Darwish’s role today.

IHS Towers’ business model is relatively straightforward: The company buys mobile towers from telecoms companies, or builds them itself, then leases them back to the operators.

Darwish co-founded the company in Nigeria in 2001, and it now has operations in Cameroon, Cote d’Ivoire, Rwanda and Zambia.

Renting out mobile communications towers is hardly the most glamorous of businesses — it is “simple and low profile, we don’t make it flashy,” he said — but the economics stack up.

Selling mobile towers allows telecoms companies to free up cash, while companies such as IHS can rent space on the masts to multiple carriers, which is more efficient. It is a model that Darwish believes the entire industry will one day embrace.

“When (a single operator) owns a tower, often it’s not optimized in terms of the revenue that that tower can get,” he said.

“They end up with hundreds of millions, sometimes billions of dollars on their balance sheet (with) towers (that are) inefficient, and simply depreciating. Sharing means more efficiency, and more margin for everyone.”

There is also a certain advantage to dealing with purely “basic” infrastructure, given the global furor about the security of telecoms networks.

IHS deals with the actual steel masts, rather than the more sensitive communications kit or software they house.

For that reason, it does not face as much scrutiny as a company such as Huawei, the Chinese equipment firm that the US believes poses a security risk.

“There’s a big difference between us and what Huawei does. We’re providers of passive infrastructure,” said Darwish.

“Our towers are simple towers … It’s a location, it’s a tower, it’s power, it’s security —  that’s what we provide,” he added.

“But at the end of the day, we’re also part of critical infrastructure for countries … So there’s always the aspect of ‘who are these guys, who are their shareholders, what’s their track record, what’s their governance like?’”

That is partly why Darwish runs IHS as if it was a “a public company by Western standards.” The company’s governance is “very strict,” and its high-profile shareholders include Goldman Sachs (through a special fund), the Singapore sovereign wealth fund GIC, the Korea Investment Corp. and IFC, the private equity arm of the World Bank.

At the end of the day, we’re part of a critical infrastructure for countries.

Sam Darwish

Such backing — Darwish said IHS has raised between $5.5 billion and $6 billion of capital since it was formed —  and governance standards bode well for a potential initial public offering (IPO) of IHS.

The company last year shelved such a plan, but Darwish said it is thinking about “moving ahead” with plans for a listing in New York or London.

“There are hundreds of thousands of towers out there that could be bought, or built, over the next few years … That’s why a potential listing is important to us at some point in time,” he said.

Such a move would potentially expedite the company’s expansion in areas such as the Arabian Gulf, which is currently its “main focus.”

IHS has already struck regional agreements to buy towers from telecoms operators Zain Kuwait and Zain KSA.

Upon completion of those two deals — which are still subject to regulatory approval — the Mauritius-headquartered IHS will have approximately 33,100 towers in its portfolio. It is currently the world’s second-largest independent, multi-country tower operator.

Darwish said Saudi Arabia is “where we’d like to grow,” with IHS recently having obtained a foreign investment license from the General Investment Authority, with plans for an office staffed by 100-200 people.

He cited the economic reforms underway, which include weaning Saudi Arabia off its reliance on oil and encouraging more women into the workplace.

“The Kingdom is going through a transformation now. This transformation is fascinating, and it’s something that needs to be watched very carefully,” he said.

“They’re using this cash they have now to start planning, and start transforming — theaters, entertainment, industries, manufacturing, all these massive investments they’re doing.”

Whilst inhabiting an industry that lacks a certain glam factor, there is something of the “Davos man” about Darwish.

Dressed casually in a designer jacket in his Mayfair office, he explained some of his interests that run parallel to IHS.

He is the founder of Singularity Investments, a private investment firm with a focus on technology and media companies in the US and emerging markets, along with DAR Properties, a property investment company.

Darwish also has a strong interest in corporate social responsibility, having supported incubator programs for aspiring tech entrepreneurs in Lagos, served as a mentor to local business executives, and worked on several health and education projects in Africa.

His personal passion, however, is the IHS Academy, launched one and a half years ago, which offers online education in the field and has seen some 40,000 course completions.

“The training for me is the single most important thing I can give, and it helps us at the end of the day,” said Darwish.

“I personally believe in the power of education — that’s what transformed my life. My father worked three shifts to basically make sure we stayed in the best private schools … He believed in what education can do in transforming lives.”

Darwish’s own studies in Beirut, however, nearly took a different turn. Though he graduated as an engineer in computer communications with “the highest distinction” — setting him out on a 20-year career in telecoms — it was never the path he envisaged.

“I wanted to be a Nobel Prize physicist. (But the university) dean called me, and he was like, ‘no — we need you in engineering’,” Darwish said. “It was just by accident that I became an engineer, but it paid off.”