Archives 2013

China manufacturing exceeds market forecasts

Manufacturing on the mainland grew more last month than analysts estimated, indicating the economic recovery is sustaining momentum amid government efforts to rein in credit growth.

The purchasing managers’ index was 51.4, the National Bureau of Statistics and China Federation of Logistics and Purchasing said yesterday.

The reading was the same as in October, which was an 18-month high, and exceeded 24 out of 26 estimates in a survey.

Stability in manufacturing growth in the world’s second-biggest economy may give Premier Li Keqiang more room to implement policy changes laid out after a key meeting of top Communist Party leaders last month.

While industrial investment is picking up and retail sales have increased 13 per cent so far this year, the mainland faces headwinds that include industrial overcapacity, excessive corporate debt and slower export demand.

“This is good news for policymakers, as the expected slowdown in growth appears pretty mild,” said Shen Jianguang, the chief Asia economist at Mizuho Securities Asia in Hong Kong.

“As policymakers can be assured of growth over 7.5 per cent, the attention is now firmly on reform.”

The stock market’s Shanghai Composite Index rose 3.7 per cent last month, the biggest monthly gain since August, on optimism that the reform package outlined on November 15 will bolster the economy and corporate earnings.

Economists estimate growth in gross domestic product will slow to 7.5 per cent next year from 7.6 per cent this year. The government set a target for 7.5 per cent expansion this year, and Li said in October annual growth of 7.2 per cent was needed to keep unemployment stable.

The PMI figure contrasts with a decline to 50.4 from October’s 50.9 in the preliminary reading of a separate gauge from HSBC and Markit Economics released on November 21, the final number for which is due tomorrow.

Numbers above 50 signal expansion in manufacturing, while those below point to a contraction.

The PMI for large companies in the official report rose to 52.4 from 52.3 in October, the highest level in 19 months, while the gauge for small companies slid to 48.3 from 48.5, the statistics bureau said.

“It’s clear that the improvements are coming from the big enterprises, and there’s little improvement in the structure” of demand, said Hu Yifan, the chief economist at Haitong International Securities in Hong Kong.

“Small companies will only recover when the overall macroeconomic situation recovers, once the economy starts to push from the bottom.”

The PMI survey from the statistics bureau is based on responses from purchasing managers in 3,000 manufacturing companies. The HSBC survey is based on responses from managers at more than 420 businesses, and is weighted towards smaller private companies.

A gauge of output in the official survey rose to 54.5 from 54.4 in October, and an index of employment rose for a second month to 49.6, the highest level since March.

A measure of new orders declined to 52.3 from 52.5, and a gauge of new export orders increased to 50.6 from 50.4.

Tycoon Li Ka-shing denies pulling out of China

Hong Kong businessman and Asia’s richest man Li Ka-shing denied speculation that he is withdrawing investments from markets in Hong Kong and the Chinese mainland, a media report said Thursday.

“It’s a big joke that I am withdrawing capital” from Hong Kong and the Chinese mainland markets, Li Ka-shing was quoted by Guangzhou-based Nanfang Daily as saying.

Li’s group sold an office building in Shanghai in October and a shopping plaza in Guangzhou in September with a combined value of around 10 billion yuan ($1.64 billion).

Commenting on these sales, Wang Shi, chairman of China Vanke Co Ltd, the largest Chinese real estate developer in terms of market value, said in his personal Weibo, the Chinese equivalent of Twitter, in September, that “it is a signal to be wary,” raising market expectations about a downturn in China’s commercial property market.

Hong Kong media reports said in October that Li’s company will possibly sell 70 percent in equities of Hong Kong Electric Co Ltd and seek an independent listing, adding to public concern that the business tycoon is withdrawing money from Hong Kong.

Li was quoted by the Nanfang Daily as saying that his Cheung Kong (Holdings) Ltd has businesses in over 50 countries and regions, and it is a normal and strategic commercial acts for him to sell or buy assets in any of these places.

Li also noted that the registration locations for his Cheung Kong (Holdings) and Hutchison Whampoa Ltd will always be in Hong Kong, denying rumors saying Li will leave Hong Kong and transfer its investments to other global markets.

Industry watchers had optimistic attitudes about the outlook of China’s commercial property markets.

“Li’s selling move was just a strategic activity to cash in once he thought the return for his capital investment had hit a margin of safety,” Yang Song, national director and head of commercial services at Knight Frank, a global real estate consultancy, told the Global Time Thursday.

Yang noted that buyers purchasing commercial properties sold by Li at relatively high prices also indicated that investors have confidence in prime properties in China’s major cities such as Shanghai, Beijing and Guangzhou.

“Both the rents and asset prices of scarce office buildings in major Chinese cities such as Shanghai still have a room for growth,” said Yang.

The number of inquires for rents of office buildings in Shanghai have increased in the third quarter, as some multinational enterprises restarted their plans of expansion in China, which is seeing an economic recovery, according to a report by Jones Lang LaSalle, a global commercial property consultancy, that was e-mailed to the Global Times Wednesday.

Talent drawn to local firms

Chinese companies are increasingly attractive to professionals: Study

China’s workforce is maturing and giving priority to different aspects of corporate culture, a new survey shows.

The 2013 MRIC Talent Report by recruitment firm MRIC/MRI China Group surveyed more than 5,000 Chinese professionals and managers on the Chinese mainland, and in Hong Kong, Singapore and Taiwan.

It found that Chinese professionals were “increasingly being lured” by local corporations, as State-owned enterprises and domestic private-sector companies expand within the nation and abroad.

Chinese companies are “increasingly attractive when compared with Western (multinational corporations) in terms of career growth and development,” wrote Christine Raynaud, chief executive officer of MRIC, and Angie Eagan, managing director of MRIC in China.

Chinese companies may be able to “draw on strong nationalistic sentiment” with workers because there is “pride associated with working for a Chinese company – especially one that is seen as progressive and technologically sophisticated with good career opportunities,” the authors wrote.

China’s economy is no longer expanding at a double-digit pace, and MRIC found that foreign companies are not investing as aggressively as previously.

Therefore, Chinese workers are realizing that “foreign companies do not necessarily offer broader roles or great job security”, according to the report.

Respondents in the survey said they valued companies with clear visions for the future, which helps clarify workers’ career paths.

During times of fast economic growth, companies developed “fast-track promotion” programs, but “people now realize that a title change does not necessarily mean a broader role or greater job security”.

Chinese professionals are now looking for companies with effective business strategies in China that allow for long-term growth.

As businesses in China mature, MRIC noted that leadership needs have also evolved.

“When we look at the most important aspects of culture to employees (and see) the belief in fairness and promotion on merit, we begin to build a picture of the expectations that are placed on leaders in China today,” MRIC said.

Asked how their company culture rates in terms of fairness and promotion on merit, 18.9 percent of workers at Chinese companies rated their companies as “poor,” compared with 15.4 percent of foreign firms.

In the area of work-life balance, professionals are facing more travel and time spent working away from home, as Chinese businesses expand.

Female respondents (42 percent) said that flexibility in work is the most important aspect of work-life balance, compared with 36.3 percent of male respondents.

Among women, 25.8 percent said it is important to have regular working hours with little or no overtime, compared with 17.4 percent of male workers.

Baoshan, Shanghai set to build Asia Pacific’s largest professional cruise terminal

As Shanghai builds out the Shanghai International Shipping Center and the China (Shanghai) Pilot Free Trade Zone, the city’s Baoshan district is pushing ahead with the construction of its own two development zones, the Chinese Cruise Tourism Development Pilot Area and the Shanghai International Cruise Industry Development Comprehensive Reform Pilot Area.

Baoshan, the heart of which is the Wusongkou International Cruise Terminal, is developing its own cruise industry, in a move to pour new vitality into the transformation and development of Binjiang New Area.

In September of this year, the Ministry of Transport of China and the Municipal Government of Shanghai jointly published their opinions concerning the implementation of the Overall Scheme for the China (Shanghai) Pilot Free Trade Zone as a means to accelerate the establishment of the Shanghai International Shipping Center. In the document the two authorities mentioned for the first time that they encourage the development of the cruise industry and support the establishment of a port of call for cruise ships in Shanghai.

Baoshan is presently considering the proposed ways to connect the Chinese Cruise Tourism Development Pilot Area to the Free Trade Zone, including setting up cruise service firms in the Free Trade Zone jointly with foreign cruise companies; partnering in ventures such as cruise travel agencies, cruise staff training, cruise staff recruitment agencies and cruise ship materials supplies; using the experience of foreign cruise service firms in market operation; and actively extending the cruise industry chain to enhance the growth and development of Shanghai’s cruise industry.

Policies such as “allowing the establishment of bonded exhibition and trade platforms in certain areas” clearly specified in the Overall Scheme for the China (Shanghai) Pilot Free Trade Zone can be applied to Binjiang New Area in Baoshan, allowing the area to set up duty-free showrooms and trade centers specially for cruise ship passengers.

Baoshan aims to become the flagship cruise terminal in China and even in Asia, by proactively connecting to the Free Trade Zone, by furnishing all the services necessary for a cruise ship’s port of call as well as by building out the infrastructure needed to encourage cruise companies to choose Baoshan for their headquarters. The district plans to actively develop ancillary markets related to the cruise industry and attract cruise liner, yacht and pleasure-boat firms whose main businesses are the offering of cruise-related services.

Ultimately Baoshan intends to expand the definition of what is meant by “cruise industry”, by making Binjiang the pioneer in the development of the industry in China, so that the area can rightfully become known as the “Long Beach of Shanghai” and serve as the beachhead for the development of the sector across China and even Asia. The district will also explore the best ways to set up convenient customs clearance facilities in the demonstration area, including 48-hour visa-free transit and the set-up of duty-free shops and refund offices within the area. In addition to existing routes to Japan, South Korea, Hong Kong and to Southeast Asia, long-haul routes –including some to Europe and the United States- should be launched in the future from Wusongkou terminal. Wang Hong, secretary of the CPC Shanghai Baoshan District Committee, said Baoshan is actively seeking to become a core part of Greater Shanghai in line with Shanghai’s urban development planning.

The Wusongkou Interational Cruise Terminal was approved for trial operation on March 1, 2012. The design of the terminal includes 1,500 meters of frontage facing the water, two large cruise ship berths which have already been completed as part of the 774 meters of frontage that were part of the first phase of the project. The two berths can simultaneously accommodate two 200,000 tonnage cruise ships. A 514-meter approach bridge connects the terminal with its rear clearance platform. The 23,000-square meter terminal with an annual passenger throughput of 608,000 people provides comprehensive entry and exit facilities for tourists, including the passenger terminal, boarding corridor and boarding equipment and other supporting passenger service facilities.

A second phase will add two more berths and extends the terminal by 736 meters to address the berthing demands of two large cruise ships. The Wusongkou International Cruise Terminal is the largest specialized cruise terminal in terms of capabilities, the size of cruise ships served and passenger traffic. By 2014, the terminal is expected to serve 239 cruise ships and 1.15 million passengers. Wusongkou International Cruise Terminal chairman Chen Xiqi advocates the development of marine tourism, cultural and leisure activities as well as high-end hotels to create a true cruise terminal “portal” in China and a global cruise hub port.

Skype announces new partnership in China

Microsoft Corp’s online chatting arm, Skype, announced a new joint venture in China after ending its six-year partnership with Li Kashing-controlled media conglomerate Tom Group.

Skype’s new partner will be GMF, an Internet communications company co-created by Founder Group and State-owned newspaper Guangming Daily.

Details of the partnership deal were not disclosed.

The lesser-known GMF will help Skype build a good relationship with the Chinese government because of its parent companies’ backgrounds, said Judd Harcombe, head of Skype’s global market development.

He added that Skype, which specializes in online instant messaging and video call services, will launch more localized services for Chinese users in order to boost its user base.

Chen Jiandong, vice-president of Guangming Daily’s flagship website, said the joint venture will help GMF to better engage the mobile Internet market and develop new-media business.

Established in 2003, Skype has more than 300 million active users globally. It entered the China market in 2004 and achieved a sizeable user population among high-end customers.

Microsoft acquired Skype in 2010 for $8.5 billion to replace its Windows Live Messenger instant-messaging service.

Local services such as WeChat and QQ have been mounting a strong threat to the United States company since 2010. QQ is said to be the most-used online chatting service in China based on customer count. The company declined to provide a figure.

Toronto is world’s most youthful city; Shanghai ranks 20th: survey

Toronto has been named the “most youthful city” in the world, while Shanghai ranked No 20, according to a new survey released on Monday.

The Canadian city was followed by Berlin and New York in the first YouthfulCities Index, a ranking of 25 global cities based on 80 indicators within 16 categories of urban life, including youth employment, financial access, economic status, civic participation, food, sports, music and art.

Toronto scored among the top five in more than half of the 16 categories and ranked No 1 for diversity.

Shanghai, which was the only Chinese city on the index, ranked fifth overall in the category of public space, sports and gaming and had the lowest youth unemployment rate among all surveyed cities.

Other youth-friendly Asian cities included Tokyo, which ranked ninth but came in first for economic status.

Seoul, the 10th most youth-friendly city, ranked first for environmental sustainability.

Some 1,600 young people aged 15 to 29 were surveyed for the index.

The aim of the survey was to “measure cities from a youth perspective”, said Youthful Cities, an organisation that helps youth and civic leaders to build better cities.

“We want to transform the insights that we gather through the Index to inspire a programme of action that allows young people to make their cities more attractive places to live, work and play,” it said.

Real estate developers hit back at claims of unpaid tax

Chinese real estate developers owed at least 3.8 trillion yuan (US$623 billion) in land appreciation tax between 2005 and 2012, according to a China Central Television report.

However, property companies hit back, with one saying the report was based on a “misunderstanding.”

Another threatened to sue.

In a weekly consumer program on Sunday, CCTV said the firms should have paid more than 4.6 trillion yuan in land taxes, but authorities collected just 800 billion yuan.

The CCTV report cited Li Jinsong, a Beijing-based lawyer and also certified public accountant and tax agent. Li had tracked data released by the National Bureau of Statistics, Ministry of Finance and State Administration of Taxation.

The CCTV report did not say how many firms were alleged to have failed to pay taxes, but said they included 45 listed Chinese property developers, trading both domestically and overseas.

In China, developers must pay tax on the increase in the value of their land when they sell properties on the land or transfer the lease.

Developers which failed to pay the tax included China Vanke Co, SOHO China Ltd, Agile Property Holdings Ltd and Guangzhou R&F Properties Co, CCTV said.

Its report said the Beijing Huayuan Group owed around 540 million yuan, SOHO China 6.4 billion yuan, and China Vanke, the country’s largest homebuilder by sales, 5.8 billion yuan.

Huayuan President Ren Zhiqiang threatened to sue CCTV.

“I only know the stupidity and ignorance of CCTV after seeing this report,” said Ren on his widely followed microblog. “It wrongly assumed company’s provision for the tax as an immediate obligation for payment of the tax. The LAT will be due after developers complete the project.”

He added: “I’m studying how to publicly prosecute CCTV.”

Li, the lawyer cited in the report, defended his claims on his microblog.

“I only know your stupidity and ignorance in the field of taxation after reading your posts,” he shot back at Ren.
“Please consult your chief financial officer before posting.”

China Vanke said yesterday that it obeyed all laws and regulations in its business operations and remained an honest taxpayer.

“The CCTV report was probably based on a misunderstanding,” Vanke told netease.com. “It mistook ‘provision’ for ‘obligation.’”

Gemdale Corp, which was said to owe 2.6 billion yuan, told the website it was “inappropriate” to use the word “owe.”
It also questioned the accuracy of data used in the CCTV report.

Last night, more than 10 real estate developers named in the CCTV report, including Gemdale, Huayuan and COFCO Property, filed statements with the country’s two stock exchanges saying that they did not owe tax.

Huawei Hires Foreign Executives in Global Push

Huawei Technologies Co., which is struggling to break out of the mold of a Chinese company, is recruiting more Western executives and rolling out a long-term incentive program to attract foreign workers.

The moves come as the Shenzhen-based company expands aggressively overseas and tries to remake itself into a global brand. Huawei, which generates two-thirds of its revenue outside China, is now the world’s second-largest supplier of telecommunications-network equipment after industry leader Ericsson. ERIC-B.SK -0.30%

Yet Huawei’s senior executives are predominantly Chinese, and only about one-quarter of its 150,000 employees are non-Chinese nationals.

Huawei’s fast growth in the telecom-equipment market has drawn criticism in the West.

A U.S. congressional report last year labeled the company a security threat and questioned whether it has close ties to the Chinese government. Similar concerns have been raised in Australia and the U.K. Huawei has denied the allegations.

To attract workers in India, where Huawei hires many engineers for its local research-and-development facility, the company earlier this year introduced an employee-benefit program modeled after its China share-ownership program. That program lets Chinese workers buy a stake in the company and profit when Huawei does well.

Huawei plans to roll out this benefit to other countries, said spokesman Roland Sladek. He declined to elaborate.

The move is significant because Huawei has called its Chinese share-ownership program a driver of the company’s success. About 74,000 of the 110,000 Chinese nationals employed at Huawei are shareholders.

In India, Huawei employees become eligible after two years. But unlike its China program, overseas employees can’t actually own a stake in the company.

Still, the program is likely to allow the company to “create a strong loyalty among the best talent” as it expands overseas, said Mr. Sladek, who joined Huawei last year from ST-Ericsson, a European joint venture of Ericsson and semiconductor-manufacturer STMicroelectronics STM +0.89% NV.

If Huawei is seen as an international firm, this could ease security concerns and give it greater access to local markets, said Sandy Shen, a Gartner Inc. research director based in Shanghai. “It’s very important that they put on the face of a global company when they go into international markets.”

Huawei’s efforts to transform itself into a global company are becoming apparent at its Shenzhen headquarters.

Indians, Pakistanis, Chinese and Westerners are among the 30,000 employees who work on the nearly square-mile campus. The campus offers Western restaurants serving steak, and an Indian and halal canteen with freshly made chapati flat breads.

CT Johnson, a 45-year-old U.S. finance expert, left Ericsson last year to be Huawei’s corporate controller. Mr. Johnson said he had qualms about taking the job, questioning whether “they might be hiring me as a Western guy just for show and without real responsibility.” But, he said, those concerns turned out to be unfounded as he was granted access to Huawei’s financial statements and details of its operations. Mr. Johnson has since changed jobs within the company, leading a division that negotiates sales contracts with customers.Still, all of Huawei’s 13 board directors are Chinese, raising questions about how much impact a handful of foreign executives will have.

Huawei has also hired a number of other high-profile Western executives to diversify its management team, including Colin Giles, a former Nokia Corp. executive from Australia, and John Suffolk, formerly the U.K. government’s chief information officer.

Other Chinese technology companies are taking similar steps. Lenovo Group Ltd. 0992.HK +1.77% , which bought International Business Machines Corp.’s personal-computer business in 2005, has hired more executives and managers from Western competitors in recent years.

Lenovo overtook Hewlett-Packard Co. HPQ +0.24% as the world’s biggest PC maker this year.

Western executives are becoming increasingly receptive to Chinese companies, said Bhavya Sehgal, head of Asian-Pacific research for Frontier Strategy Group, as these companies expand and snap up assets around the world.

Huawei also has more opportunities to recruit executives, in part because some Western rivals have been struggling and cutting jobs, said Canalys analyst Matthew Ball.

In October, Alcatel-Lucent ALU.FR +0.77% of France said it would reduce its workforce by roughly 15%. In July, Huawei said its revenue for the first half of the year rose 11% from a year earlier to 113.8 billion yuan ($18.7 billion).

Mr. Johnson said he is adjusting to an “indirect” manner of communication at a Chinese company. In one of his first projects for Huawei, Mr. Johnson forged ahead with a new method of compiling financial reports, not understanding that colleagues’ questions were really an objection.

“At Western companies, I would expect my subordinates to challenge me, in a direct but respectful way,” Mr. Johnson said. “At Huawei, and I suspect in most Chinese companies, that’s the same as cursing.”

The project was later scrapped.

“Chinese companies are giving control, but the question is whether they give all the independence required for Western executives to be successful,” said Mr. Sehgal.

China to see sharpest rise in salaries during 2014

Salaries across the Asia-Pacific region are set to rise an average 7% in 2014, with China and Vietnam leading the way in East Asia, after allowing for inflation and Japan seeing the smallest raises, according to an American global professional service firm, Towers Watson.

According to the survey, salaries in China are forecast to rise 8.5% and in Vietnam 11.5%, before inflation is taken into account, the global risk management and human resource consulting firm said.

It added that taking inflation into consideration both countries are set for 4.9% increase on an average. Meanwhile, the figure stands at 4.5% for Hong Kong and Singapore, 11% for India and only 2.3% for Japan.

What could be further interpreted from the findings is that many companies in the Asia-Pacific region are finding it harder to find and retain suitably skilled staff, as more than 80% of the companies surveyed say a larger portion of their salary budget increase allocation would go to high performers in 2014. Moreover, less than 1% of the companies anticipate a pay freeze, compared to nearly 4% in 2013.

Sambhav Rakyan, Global Data Services practice leader, Asia-Pacific at Towers Watson said that overall the data for 2013 and 2014 shows great similarity, which is assumable that companies should be budgeting for salary increases much in the same manner as last year.

However, he indicated that it depends on the affordability for the company. If the company is growing at a fast rate and revenue exceeds the cost by a huge margin, it is easier to be aggressive on salary budgets than low growth companies. He also noted that Employee Value Proposition (EVP) is strongly significant.

“People may say ‘it’s not about the money’, but the reality is that base pay is the number one drive for attraction and retention globally based on the Tower Watson 2012 Global Workforce Study. However, we also believe that a well-defined employee value proposition plays a very important part too”, said Rakyan.

Among the many areas that the survey looked into, the pharmaceutical sector is expected to see the biggest pay rises at 7.3% on average in 2014 for the region. While retail and media sectors are expected to see about 5.4% – 5.7% rise, down a touch from 2013.

Meanwhile, the anticipated salary rises in financial services are considered to be in an area of particular interest, given the sector has just come out of several years in the doldrums. The survey suggested that those working in the financial services sector could look forward to increases region-wide averaging 6.2%, compared to 5.7% in 2013.

The biggest raises are anticipated in China (8.8%), India (10%) and Indonesia (9%). Whereas, the major regional financial centers; Singapore, Hong Kong and Japan will see more modest raises – respectively 4%, 4.5% and 2.3%.

It is also important to note that Asia’s emerging economies, such as Indonesia, Sri Lanka and parts of Indochina, are the standard bearers for high pay increases, as these countries tend to have the highest economic growth rates of around 6%-8.5%. However, they also have the strongest inflationary pressures which take up much of those pay rises.

According to Jeffrey Tang, director of Towers Watson’s Talent and Rewards practice in Hong Kong, there are several factors that drive behind the increase of salaries throughout the region. The major ones are such as the great increase in demand for compliance staff to meet with the increased regulations and also the regional expansions by local players that seek to go beyond their domestic shores.

Hotel group IHG looking to recruit 110,000 new staff in China

Intercontinental Hotels Group (IHG) is looking to double the number of hotels it has in China in the next two years and recruit more than 110,000 employees in the country.

This is according to UK newspaper City AM, reporting comments of chief executive officer Richard Solomons yesterday (19 November) ahead of meeting with investors.

The company has already doubled Chinese hotels to 200 in the last five years.

Earlier this year the firm announced a major recruitment drive in India – albeit quite not on the scale of its Chinese plans – and last year talent manager Claire Guberg spoke of IHG’s plan to “look at internal talent first of all” as expansion continued.