Archives February 2009

McDonald’s to open 175 outlets in China, hiring more than 10,000

BEIJING (Xinhua) — McDonald’s China announced on Wednesday an expansion plan to set up 175 new outlets and create more than 10,000 jobs this year on the Chinese Mainland despite global economic downturn.

The expansion was the largest of its kind ever made by McDonald’s across the world.

“The move will bring more opportunities for cooperation to food-related industries in China,” said McDonald’s China CEO Jeffrey Schwartz.

The US-based food chain store group has 50 suppliers in China, with more than 95 percent of its food materials coming from local market.

On the same day, the group announced its decision to launch a 16.5 yuan (about $2.4) discount meal in its Chinese outlets.

“The price is even lower than that of a similar product in this market a decade ago,” said Schwartz.

He added the company’s management of material supply and its increasing presence in China helped cost control and made the big discount possible.

McDonald’s has opened more than 1,050 outlets in China in the past two decades.

8 Must-Knows about Business Set-up in China

More and more Australian companies are setting up their own presence in China in order to source products/services directly from China or enter the Chinese market. However, given the alien nature of local regulations and business environment in China, it is critical to be proactive and fully prepared before you take the strategic move to set up your own presence in China.

Here are some “must-knows” before you set up the business in China:

1.You have more than one option for a local presence in China. Your China presence may be in the form of a wholly owned foreign enterprise, a contractual joint venture, an equity joint venture, a representative office or a local representation by a third party (local secretary/representation service companies).

2.Carefully define your business scope for the China presence. China National Development and Reform Commission may prohibit, restrict, permit or encourage your business set-up based on your business categorization and scope. Hence it is critical to carefully define your business scope so as to be permitted or encouraged to set up the presence.

3.Select the right location for your China operation. China abandoned its preferential tax rate for investments of foreign companies from January 1st 2008. However, some areas still offer local preferential policies for foreign investors in terms of land leasing/procurement, staff recruitment and management, local tax etc.

4.Confirm the minimum registered capital for your China operation. The Chinese government requires certain minimum registered capital for various types of businesses. However, local Industry and Commerce Administrations may decide on your minimum registered capital based on their judgement of your business scope and operation scale. You need to confirm with local government agencies the minimum registered capital through local contacts before taking any other actions in case they require an amount far above your financial resources available for the China operation.

5.Integrate commercial clauses in the Articles of Association to maximise profit repatriation into Australia. You may have commercial arrangements between your Head Office in Australia and the subsidiary in China in order to guarantee maximum profit repatriation. However, some arrangements must be included as part of the Articles of Association to be valid. The Articles of Association is to be submitted to local government agencies for approval and filing during business license registration. Hence, you must incorporate necessary clauses in the Articles of Association in the first instance.

6.Fully understand employers’ responsibilities and liabilities in China. China issued the new Law of Labour in 2007 which specified issues on employment contract, redundancy, etc. Without preliminary knowledge of this law, you may end up spending a huge amount of time and money terminating the contract with under performing employees, as the structure of the contract was wrong. You also need to be aware of the mandatory employee welfare and benefits so as to include such cost in the budget.

7.Conduct thorough due diligence and credit check on your joint venture partners. Your partners may not be what they claim to be. China has the business culture to show their wealth and status by driving luxurious cars, wearing prestigious watches and owning an impressive factory. Hence your Chinese business partners may look financially viable and well connected but, as a matter of fact, live on bank loans and personal debts.

8.Develop a comprehensive local employee management system. It is a hard job to recruit the right staff in a foreign country. It is even harder to effectively manage the local staff in a foreign country. A sound and robust employee management system will encourage the engagement and commitment of local staff and avoid potential risks. You may include reporting and communication policies, staff training, performance assessment, remuneration, career management and employee management manual in the system.

Business set-up in China is a big project by itself, which requires financial and time commitments, business management knowledge and China expertise. Identifying a competent agent to manage the complex process will be a cost and time effective way to avoid potential pitfalls.

Information above is provided by Sara Cheng, Manager for Greater China, Australian Business International Trade Services.

Ericsson Will Recruit Hundreds Of New Chinese Employees To Support 3G Construction

While some companies around the world are responding to the financial crisis with job cuts, the newly issued 3G licenses in China have caused Ericsson to plan a hiring spree of several hundred new employees in China in 2009.

Chinese media previously reported that Ericsson China would cut 150 staff in March 2009, accounting for 5% of its Chinese employees. This was said to be a part of Ericsson’s global layoff of 5,000 people. However, a representative from the human resources department of Ericsson China denies the rumor and says their pressure now is from recruitment, not layoffs. Ericsson’s technology department in China will hire several hundred new employees this year and its telecommunications service department also needs new blood.

In China Unicom’s 3G network construction tender, Ericsson is one of the major winners. China Mobile’s chairman Wang Jianzhou also said at the end of January 2009 that the company planned to include Ericsson in the list of its 3G network equipment suppliers.

In its latest financial report published in January 2009, Ericsson said it was seeking to further cut costs by such measures as cutting 5,000 employees, aiming to save SEK10 billion annually before the second half of 2010.

China Unicom launches recruitment drive for new subsidiaries

China Unicom is looking to hire managers for three subsidiaries focused on the development of innovative value-added services, according to a company announcement on Jan. 21.

Unicom NewSpace, China Unicom’s subsidiary responsible for value-added service development and operations, and its two newly-established subsidiaries respectively responsible for music services and video services, will hire nine managers with experience in music services, video services, Internet advertising, IM and SNS.

By recruiting experienced managers, the company hopes to further develop its broadband, mobile and Internet services, particularly in time for its 3G launch.

China Unicom said previously that it aims to have a profitable WCDMA business by 2010, and innovative 3G value-added services will be crucial.

According to a CCID Consulting report, successful 3G operators will need to develop pioneering applications as well as provide individual and customized services for users.

Roche Seeks Biotech Licensing, Takeovers in China

Roche Holding AG, Switzerland’s biggest drugmaker, may make its first acquisition of a Chinese biotechnology company or buy rights to a compound developed in the country later this year.

Two executives from Roche’s drug-partnering unit based in China are scouting for opportunities, including licensing experimental medicines, Lee Babiss, the head of Global Pharma Research at the Basel, Switzerland-based company, said in a Feb. 4 interview.

“They’re looking not only for those types of assets but also drug formulation because know-how is really very, very deep in China,” Babiss said. “We are also narrowing down a few opportunities that might involve mergers and acquisitions or simple in-licensing.”

Chief Executive Officer Severin Schwan said earlier this week that the drugmaker is “constantly” looking for acquisition targets in addition to the planned $42.1 billion purchase of partner Genentech Inc. Roche, which reported a drop in second-half net income on Feb. 4 and said earnings may not grow this year, went hostile in its bid for full control of Genentech a week ago after failing to secure a negotiated deal.

Bigger Slice

Pharmaceutical companies are seeking a bigger slice of sales in emerging markets such as China as revenue in mature markets in the U.S. and Europe sags. The deepening global recession is spurring industry consolidation as governments increasingly favor generics and cheaper medicines as a way to stem the rising cost of health care.

Roche spent about 100 million Swiss francs ($85.4 million) in research and development in China from 2004 to early 2008, focusing on cancer, arthritis and anemia. The Swiss drugmaker, which opened its first subsidiary in the country more than 80 years ago, operates four sites in Shanghai and Hong Kong with a total of 2,000 staff.

Roche’s hostile bid for South San Francisco, California- based Genentech is 2.8 percent lower than the price it initially offered in July. It follows a $68 billion offer by Pfizer Inc. for U.S. peer Wyeth last month.

Genentech, whose Avastin and Herceptin cancer drugs have made Roche the world’s biggest seller of anti-tumor medicines, has helped the Swiss drugmaker grow faster than its peers and left it less exposed to patent expirations than Basel neighbor Novartis AG or Pfizer, which is the world’s largest drugmaker.

Harvard Graduates

Roche is conducting about six research projects in China and is working with a local partner on an experimental cancer treatment. The collaboration isn’t a “traditional” licensing relationship, Babiss said, without providing details.

The Swiss drugmaker is also looking to hire “excellent” scientists in China and is transferring more chemistry-related research to partners there, Babiss said.

“Most of the people that we’ve hired that have come back were trained at Harvard and MIT and these are brilliant people,” Babiss said, referring to Harvard University and the Massachusetts Institute of Technology. “At the beginning it was chemists, now the biologists are coming over. More of them are going to come back to China and shape that environment.”

Germany’s Bayer AG, Sanofi-Aventis SA of France, and London-based AstraZeneca Plc are among European rivals also expanding their presence in China. Economic growth in China and India is creating pharmaceutical markets that are growing twice as fast as those of developed nations, PricewaterhouseCoopers LLC said in a report last year.

Science Spin-Offs

GlaxoSmithKline Plc, the world’s second-largest drugmaker, in 2007 earmarked $40 million for a research and development facility in Shanghai. Novartis, the same year, decided to open a $100-million research center in the same city.

Roche may also create spin-offs in the country by helping scientists to set up their own companies with compounds licensed from the Swiss drugmaker, he said. Roche hasn’t lost many scientists in China, though “eventually in that type of dynamic environment people will leave,” he said.

“The question is do we want to lose the talent or do we want to have some hook back to that talent and I’d rather do the latter,” Babiss said. “If someone’s going to leave, I’d say well alright you want to leave, you’re entrepreneurial – how can we help you leave?”

Babiss is considering hiring “a few people” with the understanding that in two or three years they would leave and form a startup.

“This is all about testing new ways of doing drug discovery,” Babiss said. “This won’t work in New York or the U.S. or here Basel, but it may work in China.”

GM’s Biggest Growth Market Is Now China

Since the days when Henry Ford set up his first factory, the United States of America has been the single largest market for automobiles in the world. With America facing a deep recession, US auto sales have fallen by as much as 37% this past month compared to year ago numbers resulting in the US, for the first time, losing its position as the world’s number one car market. For the month of January, more cars were sold in China than in the United States. Japan’s auto market ranks third in size behind the US and China.

In part that’s due to the Chinese government cutting the tax rate on new car purchases, previously at 10%, in half. Although still lower than China’s January 2008 sales totals, January 2009 saw relatively strong auto sales performance once the tax cut was announced. The Associated Press reports that General Motors (GM) expects Chinese auto sales for all of 2009 to eclipse US sales by more than a million vehicles. If those numbers prove accurate, it is not likely that the US will ever regain the lead since the market penetration of automobiles in China is still very small.

China, of course, has a total population that is more than four times greater than the population of the US and has been executing a long term economic policy encouraging domestic consumption. China would like to rely less on its foreign exports for its continued economic growth and more on its own domestic markets. Yet its auto industry is still largely reliant on technology borrowed from western companies. General Motors has invested heavily in China and sold over a million vehicles in that country in 2008. The Chinese government is, however, intent upon developing its own auto technology infrastructure and is committing billions of Yuan toward technology modernization efforts in the industry this year.

China has also made huge investments in roads and highways in its major industrial areas in the last decade and modern highways, even by US standards, now lay waiting for increased traffic. A visit to the industrial areas in the countries south, however, finds a mish mash of old and new, with overloaded bicycles and scooters weaving in and out between compact cars, large trucks, and stripped down tractors as the agrarian economy gives way to industry.

China, not M&A, is AZ’s promised land

By Tracy Staton

You all know what AstraZeneca CEO David Brennan said last week about big mergers: Not for us; we don’t need it. So what does it need to do to overcome the litany of challenges that face every drugmaker these days? In an interview with The Economist, Brennan says AstraZeneca will cut costs–he doesn’t need a merger to make the company more efficient–plus increase sales in emerging markets. And then there’s the good old “boost innovation” goal (isn’t that on everyone’s list?)

AstraZeneca is in the middle of a big-time cost-cutting plan, and the company announced more layoffs last week to bring the total number of axed jobs to 15,000 over five years. In another move to shrink expenses, AstraZeneca is moving manufacturing to developing countries. China, for instance, which serves Brennan’s cost-cutting push and his emerging-market sales goals. It just expanded a factory outside Shanghai, for instance, which will supply drugs throughout Asia now, and aims to export to Europe by 2012 or 2013. In 10 years, one-quarter of AstraZeneca meds may come from China.

The drugmaker, you’ll recall, made a big move into China years ago, and it’s been building on that presence ever since. It uses tried-and-true pharma sales techniques on Chinese doctors, and it’s working; sales there are growing at a faster-than-average clip. In a market where cronyism and kickbacks used to rule, pharma detailing and sales conferences seem like out-of-this-world professionalism, the magazine notes.

We’ll let you check the article for Brennan’s innovation plans. Hint: They include selective biotech buyouts.

China advances vocational training to help laid-off workers

About 4 million laid-off worker in China attended vocational training for reemployment in 2008, the Ministry of Human Resources and Social Security said Monday.

Another 400,000 received education to start self-employed business, which encouraged individuals to be their own bosses and make a living, the ministry’s spokesman Yin Chengji said.

“We have set up special funds and are using social unemployment benefits to strengthen training for workers. We also emphasize vocational training for the laid-offs, especially the migrant workers,” Yin said.

He said the training would cushion the impact of the global financial crisis and was aimed at stabilizing the employment situation in the country.

East China’s Shandong province had organized training programs for 230,000 laid-offs last year, and 75 percent of those trained found new jobs, according to local government figures.

The Ministry of Finance also said in mid-January it would play a leading role in creating jobs in government-initiated projects such as civil infrastructure building and environmental protection.

Deputies call for guarantee of jobs for migrant workers

The Shanghai municipal government should set aside certain employment vacancies for migrant job seekers after the Spring Festival holiday, three migrant worker deputies to the city’s people’s congress suggested.

With the worldwide financial crisis showing no signs of slowing down, migrant workers returning home are worried about losing their jobs after coming back from the holiday, according to Zhang Xiongwei, Hong Gang and Pan Aifang, the three people elected to represent the city’s five million migrant workers before the local legislative body.

“The government should do something to make them go home happily and come back with a hope (to find a job). Migrant workers make a huge contribution to Shanghai’s fast development,” Zhang said.

The deputies said some vacancies at construction projects of infrastructure facilities and at services in which the government pays to take care of the old, poor and sick should be set aside for them.

The government should include unemployed migrant workers in the city’s reemployment services system, in which the government trains and helps the unemployed find jobs, they added.

“I also suggest the government take measures to ensure a stable job market and prevent companies from taking advantage of the crisis to lay off employees,” Zhang said.

In the annual sessions of Shanghai Municipal People’s Congress last month, Mayor Han Zheng said migrant workers, white-collar workers and university graduates face the most difficulty in securing employment, and more efforts should be made.

He said the government would subsidize companies to maintain full employment, help train the unemployed and provide better services and more loans for people to start their own businesses.

The three deputies said they have not seen a large amount of migrant workers being laid off in Shanghai. “But the worst time has not come yet,” Zhang said.

China to build 5,000 internship bases for youths

China is to build up to 5,000 “bases” in 2009 to provide internship positions for the young to better prepare them for the job market as it feels pain amid the global financial crisis.

The Chinese Communist Youth League, a government body for work related to the young, will coordinate in recruiting qualified companies and individuals, the League said on Monday.

The youth leagues at municipal or provincial levels will select suitable companies to form the “bases”, businesses or sets of businesses which will be able to provide positions for at least 10 interns each year with basic living allowances.

Qualified candidates for the intern positions are job-hunting fresh university or vocational school graduates, those who have failed to find a job since graduation, young laid-off workers, and young migrant workers.

The first group of nearly 2,000 such bases are already selected and made public, offering about 60,000 positions in the industries of finance, publishing, telecommunications, manufacturing and transportation.

The aim of this move is to ease the employment pressure and achieve a win-win situation between the companies and the youths, according to the Youth League.

The Ministry of Human Resources and Social Security said on January 20 that there would be 7.1 million college graduates seeking vacancies this year, including 1 million of those having failed to secure jobs last year.

The ministry also said, as of the end of 2008, there were 8.86 million urban residents registered as jobless, 560,000 more than the end of the third quarter.