INTERVIEW-Wilbur Ross bets on Chinese steel, textiles, coal
Wed Jul 13, 2005
By Lucy Hornby
JIAXING, China, July 13 (Reuters) - Wilbur Ross, who made a fortune consolidating some of America's biggest steel, textile and coal companies, thinks the same industries are a good bet in China.
On Wednesday, the "king of bankruptcy" added a $95 million textile joint venture to a portfolio that includes a stake in China's eighth-biggest steel mill and auto parts factories.
Next stop: Beijing, where Ross plans to meet potential partners about a coal investment.
Those are some of the industries where China's rising export prowess is threatening U.S. jobs, leading lawmakers to call for an appreciation of China's currency, the yuan or renminbi.
"The U.S. has become too fixated on the renminbi," Ross said in an interview at the light-manufacturing city of Jiaxing, near Shanghai. "The pressure for renminbi revaluation is kind of a slogan, a symbol, a rallying cry."
China's yuan trades in a narrow band around 8.28 to the U.S. dollar, a level that some in the United States and Europe say makes the Asian country's exports unfairly cheap.
"If China does widen the band or let the renminbi float a little bit, I don't think they'll do it in a huge way," he said.
"The Chinese government is well aware of the terrible problems that ... floating the yen had for Japan. I believe that a large part of the reason that Japan's bubble burst was what they did with their currency."
Japan bowed in the 1980s to U.S. pressure to revalue the yen. Asset prices shot up then collapsed in a deflationary heap, ushering in a decade of stagnation, deflation and a full-blown banking crisis.
Now, pressure on China to allow its currency to appreciate is driven by domestic American politics, particularly in districts where U.S. manufacturing jobs are threatened, and could ease once the 2006 Congressional elections are over, Ross said.
"China has become a symbol of America's manufacturing problems and trade balance problems," Ross said.
"A rising standard of living only means one thing: commodities consumption. So that's why we're interested in steel and coal and textiles, and we'll probably do something in copper and zinc and lead."
COMMODITIES BET
Ross came into the public eye after creating International Steel Group in 2002 by combining several bankrupt U.S. steel giants, including Bethlehem Steel -- whose long-running financial woes inspired a Billy Joel song in the 1980s.
Ross' private equity firm WL Ross & Co. still holds a $2.25 billion stake in Mittal, the world's largest steel maker that was created from Ross' International Steel and firms owned by industrialist Lakshmi Mittal.
Mittal in turn owns 37 percent of the listed unit of China's eighth largest steel firm, which could be a springboard for further Chinese investment, Ross said.
"We believe that the government would like to have maybe five steel companies that are half the total industry. Whereas now its very fragmented," he said.
Ross said he would meet with potential coal partners in Beijing later this week. Through his coal firm, International Coal Group Inc., he already controls 1 billion tonnes of coal reserves in the United States.
He declined to provide more details on base metals plans.
Although he has made a name for himself by consolidating and turning around struggling industrial giants, Ross' China textile investments reflect a view on its long-term competitiveness. His International Textile Group and Hong Kong conglomerate Novel Group on Wednesday broke ground on a $95 million joint venture that will make denim for export-oriented garment makers.
"This is a strategic investment, not just an opportunistic one," Ross said. He said he hoped it would be the first of many.
China's competitive wages and disciplined workforce are matched by Vietnam, Ross said. ITG last month signed a cooperation agreement with state-owned Vietnam National Textile Garment Group (Vinatex).
ITG hopes ultimately to take a stake in Vinatex, which accounts for a fifth of Vietnam's textile exports, Ross said.
He said he would be willing to become a strategic investor in a Chinese bank, but is not yet in talks to do so.
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