Archives June 2014

Tencent, 58.com partner up

Tencent Holdings, China’s largest Internet company by market share, announced Friday that it is buying a 19.9 percent stake in the Chinese online marketplace 58.com Inc for $736 million, an important move analysts said for Tencent to promote its online-to-offline (O2O) connection of businesses.

Unlike the traditionally separate business models of off-line shopping and e-commerce, O2O is a new model that makes online payment a necessary step in a wide range of off-line services.

Yao Jinbo, founder and Chief Executive Officer of 58.com, confirmed on his Sina Weibo late Friday that the strategic cooperation project was completed within 10 days without disclosing further information.

Shanghai may launch international gold exchange in FTZ

Shanghai may launch an international trading board for gold in the China (Shanghai) pilot Free Trade Zone this quarter.

The new trading board in the FTZ is expected to attract foreign participants as China hopes to have a bigger influence on global gold prices.

The FTZ is expected to attract a gold inventory of 1,000 tons.

Gold sales rose to 323 tons in the first quarter, up 0.8 percent from a year earlier, local media reports said citing the Shanghai Gold Exchange.

Xu Luode, secretary-general of the bourse, said earlier that the international board would adopt Shanghai Gold — a spot gold trading mechanism similar to the Loco London Gold.

Clariant plans R&D center in Shanghai

Swiss specialty chemicals company Clariant said on Wednesday that it plans to establish a research and development center in Shanghai.

The R&D Center, expected to be operational by 2015, is intended to cater to the burgeoning Chinese specialty chemicals industry, which Clariant has been serving since 2011, by providing enhanced technical service and developing catalytic solutions tailored to China’s requirements. The company’s previous ventures in China have focused on coal-to-methanol catalysts.

The center will focus on coal-to-chemicals and specialty applications while developing new catalysts for hydrogenation applications and supporting Clariant’s pre-existing Chinese production sites.

German state honors Huawei for investments

Chinese tech company Huawei received Monday the NRW.INVEST Award in the western German city of Duesseldorf for its outstanding investments in the German state of North Rhine-Westphalia (NRW).

For the 10th time, NRW Economics Ministry and NRW.INVEST, the state’s economic development agency that deals with support for foreign investors, have presented the NRW.INVEST Award.

With this award, NRW honors exemplary investments at the business location. This year, three companies received awards, including Huawei, the American package delivery company UPS and the French company Air Liquide.

North Rhine-Westphalia is a leading location in Germany for foreign investments. According to NRW Economics Minister Garrelt Duin, about a quarter of investment projects in Germany flew to the state in 2013.

“Engine of the development is Asia,” NRW.INVEST CEO Petra Wassner said at Monday’s presentation ceremony.

According to NRW.INVEST, the number of foreign investment projects in NRW jumped to 236 in 2013, a 12 percent increase compared to the previous year. Again, China led the country ranking with 63 investment projects.

Huawei, a Chinese multinational networking and telecommunications equipment and services company, has been making large investments in NRW’s capital city of Duesseldorf. Currently, 650 employees are working in the company’s headquarters for Western Europe and Germany which is located in Duesseldorf.

Changan Ford moves into new phase of rapid development

Changan Ford stepped into a new phase in capitalizing on China’s automobile market when the company announced Thursday the opening of 88 new dealers to join its massive dealer points around China.

A grand opening ceremony held in Shanghai featuring traditional Chinese performances like drums and lion dancing mirrored the automobile giant’s Chinese ambition – keep striding confidently forward in the world’s largest automobile market.

Changan Ford has successfully introduced a number of new models including the Ford New Focus and Ford Kuga.

In 2013, Changan Ford sold an accumulative total of 678,951 units, a year-on-year growth of 62 percent over 2012.

In the first five months of 2014, the Changan Ford lineup had sales of 330,771 units, with an accumulative year-on-year increase of 43 percent.

Consumer demand, resulting in the sales increase, created Changan Ford’s need for the expansion of its dealer points.

With the newly launched 88 dealers, the total number of Changan Ford’s dealer points in China rises to 750, and the figure is still growing.

“The newly-opened 88 dealers allow us to better serve our growing Chinese customer base and improve their ownership experience. With the growth momentum, we expect to exceed 800 dealer points in China by the end of 2014,” said Marin Burela, president and CEO of Changan Ford Automobile Co.

As vehicles in first-tier cities started to be oversupplied, Changan Ford mapped out one-third of its dealer points deep into the less developed central and western regions in China.

About 75 percent of dealer points are based in small cities, which the company said represents the growing customer demand in these areas.

What drives the expanding of dealer points is an ever growing manufacturing capacity.

“We will launch our third plant in Chongqing in the future and you also know that our Hangzhou plant will also go into production in 2015, and both of these investments are being made strategically to ensure that we meet demand with supply in the area where we see the market is growing, ” Burela told reporters during the interview.

Germany bullish on investments in China

Economic rebalancing is likely to usher in a “new era” of German investment in China, said Lothar Herrmann, chairman of the German Chamber, after the German Business Confidence Survey 2014 launch on Wednesday.

German companies operating in China reported robust performance and relative optimism for 2014 despite the economic slowdown.

“We do believe at the German Chamber that there is optimism because our technology can contribute to the next level of development in China,” said Herrmann.

German investment going forward is expected to be driven by its technologies in automation, digitalization and renewable energy, which are seem as possible solutions to the challenges facing China during its economic rebalancing.

Of the 417 members that participated in the survey, 23 percent expect to exceed their business targets for this year compared to only 17 percent expecting to not to achieve or only partly achieve their targets, up 9 percent and down 4 percent respectively from 2013.

Forty-nine percent of the companies expect economic conditions to improve, with 75 percent of the automotive sector maintaining a positive outlook.

The majority also welcomed reforms with 70 percent of companies viewing the central government’s reform agenda as having potentially positive effects on their businesses.

However, this positive sentiment is yet to translate into investment as 48.6 percent of companies stated that initiated policies will have no influence on their investment decisions.

Human resources issues still remain the biggest challenge to German businesses operating in China. However, human resource issues are on the decline as German companies appear to have gained experience in how to deal with the challenges of doing business in China.

E-commerce giants competing fiercely during June

Tmall launches major discounts to rival JD sale

China’s leading online retailer tmall.com launched Wednesday a sales promotion for consumer electronics and home appliances, a move analysts said heats up the battle with its major rival JD.com Inc (JD) which regards the day as a special shopping festival due to it being the anniversary of the company’s founding date.

Tmall.com, backed by the country’s e-commerce giant Alibaba, offered discounts between 60 and 70 percent for home appliances and lowered smartphones’ prices by 100 yuan ($16) to 1,000 yuan.

Meanwhile, JD, which has been building up a shopping spree atmosphere since June 1, rolled out its strongest sales promotion to date for Tuesday to Friday, cutting prices of consumer electronics by up to 2,000 yuan and providing 90 percent discounts for some home appliances.

The four-day event is a part of JD’s 20-day promotion for its 11th anniversary this year on Wednesday, involving consumer electronics, cosmetics, food and books. The promotion has triggered the price war between the e-commerce players.

Tmall.com also launched a four-day sales promotion from Monday, which analysts said mainly focus on consumer electronics and home appliances in response to JD’s strongest discounted sales. JD’s smaller rival yhd.com (YHD) even claimed on its official website that all consumer electronics it sold would be 50 yuan cheaper than those on JD from Monday to Wednesday. Gome.com and suning.com, the home appliance online shopping platforms of major local retail chains, also joined the price competition almost during the same period.

“JD is under siege,” said Lu Zhenwang, founder of Shanghai Wanqing Commerce Consulting.

He explained to the Global Times Wednesday that all e-commerce platforms intend to tap the profitable consumer electronic retailing sector where JD has further consolidated its leadership after combining with yixun.com, a consumer electronics online shopping platform developed by Tencent early this year.

Despite the ambitious efforts of YHD and Gome, Lu said that they can hardly pose big threats to JD.

Tmall is JD’s strongest rival and is likely to win the battle this time due to its large user base, said Li Yi, secretary-general of the China Mobile Internet Industry Alliance.

A report issued in May by Analysys International shows that Tmall is the most preferred online shopping platform with its active users reaching 112.06 million in the first quarter of 2014. The active users on JD hit 44.2 million, ranking in second place.

Tmall’s strong cooperation with the three State-owned telecom carriers and domestic home appliance makers also give it more competitive advantages over JD, said Lu.

During this sales promotion, Li Xiao, a Beijing-based white-collar worker, went to Tmall and bought a trendy smartphone Wednesday.

“The reason to choose Tmall instead of JD is simple. The three telecom carriers all opened online flagship shops on Tmall and offer discounted phones on the platform that cannot be found on JD or other platforms,” she told the Global Times Wednesday.

A total of 500,000 handsets have been sold in the first 10 hours, accounting for half of the average daily sales of smartphone in China, according to a press release e-mailed to the Global Times Wednesday by Tmall.

A PR representative from JD told the Global Times Wednesday that the average sales of handsets and related accessories reached more than five per second on Wednesday morning.

Both Lu and Li Yi believe that the price war is still the major promotion method in China where many consumers are sensitive to price, but they said e-commerce platforms this time are also trying other ways of marketing to attract people.

Between May 30 and June 14, JD sent cash gifts – which can be applied to online purchases – worth 1 billion yuan to users of its mobile application to draw attention to its sales promotion.

Tmall is also giving away cash gifts worth 50 million yuan to shoppers during its current promotion.

Although consumers can benefit from the heated competition and price war [during this period], Li Yi suggested that they consume reasonably and buy things that are really needed.

“Some goods may be even more expensive than before. People need to carefully compare the price tags of goods before placing an order,” he noted, calling for more supervision from the authorities during the sales.

Lu noted that these retailers are all focusing on consumer electronics and home appliances, which is a wise decision given that June usually sees many purchases of such goods.

Big sales will challenge e-commerce platforms’ logistics and post-sales services, which need to be further improved, he remarked.

Alipay-housing authority launch virtual transport card

Alipay, the e-payment arm of Alibaba Group Holding Ltd, teams up with China’s Ministry of Housing and Urban-Rural Development to launch a service on Wednesday that allows commuters use public transport without IC cards or waiting in line to buy a ticket.

Through wiping near-field communications-supported mobile phones at readers at public transport stations, people can travel in a more convenient style. What they need to do is to buy a NFC-enabled mobile phone, download Alipay Wallet, the app of Alipay, and apply for a virtual public transportation card through the app.

The service is one part of Alipay’s project named “future pubic transportation”, which aims to build a public system that offers convenient service in the mobile Internet era.

The NFC-based public transportation service co-launched by Alipay and the housing authority is expected to be available soon in 35 cities, including Shanghai, Tianjin, Shenyang and Ningbo. According to Alipay, as many as 60 cities in China are expected to join the project by the end of this year.

Ma Hong, director of the pubic transportation service center at the Ministry of Housing and Urban-Rural Development, said that with the economic progress, people are traveling more frequently.

“Because different cities use different IC cards for public transport, people have to buy new cards whenever they go to a new city. It is high time to find a unified solution to this problem,” Ma said, adding that thanks to the service co-launched by Alipay and her ministry, people can now travel in a more convenient way.

Through teaming up with Alipay, which has about 100 million mobile users, the ministry can effectively boost the user group of the virtual IC cards. Alipay said in a statement that it will open its resources to mobile phone makers and public transport authority in order to improve the transport system in China.

Robot sales shift to higher gear as labor force wanes

Robotics companies are expected to triple sales in China to around 110,000 sets by 2020 as more Chinese manufacturers embrace the high-end growth path, a senior industry official said on Tuesday.

Wang Ruixiang, head of the China Machinery Industry Federation, said based on the rapid growth of the nation’s robotic industry in recent years, the federation has set a high target and the government will continue to provide support for the industry’s development.

By 2030, sales of industrial robots will reach 290,000 sets and a couple of Chinese companies would be among the top five robotics companies in the world, Wang said.

“As the world’s second-largest economy, China has huge potential in the robot market, which is prompting more foreign and domestic companies to invest in the sector,” he said.

According to a recent United Nations report, China is likely to see a sharp fall in its labor force by 2015. The labor shortage and the lack of advanced technologies represent huge business opportunities for the robotics sector, said Song Xiaogang, secretary-general of the China Robot Industry Alliance.

According to data provided by the alliance, 37,000 industrial robots were sold in China last year, a 36 percent growth over 2012.

China became the largest robot consumer market, with one-fifth of the global market share, overtaking Japan and the United States in 2013, said the alliance.

Haier Group, a consumer electronics and home appliances company, is one of the Chinese firms that is embracing robotics in a big way. The company plans to cut 10,000 employees this year after laying off 16,000 employees in 2013, according to Zhang Ruimin, chief executive officer of the company.

Zhang said most of the layoffs this year will target mid-level employees, as the mechanization process gathers momentum. He constantly stressed the idea that in the long run the manufacturing sector would need to use more technology like robots.

Haier is not alone in using robots among home appliances companies.

Foxconn Technology Group, an electronics manufacturer, plans to use 300,000 robots by the end of this year to replace repetitive and dangerous jobs on the production line.

Although the industry is booming with a rapid growth rate in recent years, Chinese robot makers are still facing challenges like lower market share in high-end products as well as shortages in innovation and technology, Song said.

Foreign companies produced more than 27,000 of all the robots sold in China last year. About 80 percent of these are multi-joint robots, with advanced technologies. Chinese companies mainly produce coordinate robots, which are mostly used for delivering goods in different industries.

“Despite a top market demand, China has only a few leading firms that are able to compete internationally,” Song said. “Due to the scarcity of technical talent, the robotics industry has encountered a bottleneck, especially when it comes to detailed industry segments.”

He Rui, director of Mianyang Fude Robot Co Ltd, a Sichuan-based company, said the company has been undertaking research and development on new types of robots that can be used by various clients.

“We are focusing on areas that are not dominated by foreign companies,” he said.

He added that the company sold about 40 industrial robots last year. Fude Robot aims to triple revenue from the current 20 million yuan ($3.22 million) to 60 million yuan in three years.

China surpasses US as world’s top corporate borrower

Sluggish capital market limits funding: expert

The Chinese mainland has surpassed the US as the world’s top corporate borrower, and higher debt risk in the world’s second-largest economy may mean greater risk for the world, a report said on Monday.

However, Chinese economists noted that the debt risk in China’s corporate sector is still well under control.

Nonfinancial corporate debt in the Chinese market was estimated at around $14.2 trillion by the end of 2013, overtaking the $13.1 trillion debt owed by the US corporations, a progress happening sooner than expected, said a report from the Standard & Poor’s Ratings Services on Monday.

The report expects that by the end of 2018 debt needs of mainland companies will reach $23.9 trillion – around one-third of the almost $60 trillion of global refinancing and new debt needs.

“It [the mainland surpassing the US as the largest corporate borrower] is not surprising at all, as the [size of] mainland non-service sector has already surpassed that of the US,” Tian Yun, an economist with the China Society of Macroeconomics under the National Development and Reform Commission, told the Global Times on Monday.

Cash flow and leverage at mainland corporations has worsened after 2009, and debt risks in the property and steel sectors remain a particular concern, the report said.

Private companies are facing more challenging financing conditions – highlighted by China’s first corporate bond default case of Shanghai Chaori Solar Energy Science and Technology Co in March and another case of default of leading private steel maker Shanxi Haixin Iron and Steel Group.

“The capital market has been sluggish during the past few years, leading to the fast growth in corporate debts,” Xu Hongcai, director of the Department of Information under the China Center for International Economic Exchanges, told the Global Times Monday.

Experts noted that the rapid growth in debt reflected some problems of the Chinese economy, but the size of the debt is still in a safe range and will not cause major risks as the economy remains stable.

“The problems of the Chinese economy are institutional and structural,” Tian said, “By addressing these issues, debt risks can be managed.”

Tian further noted that most corporate debts in China are internal debts, thus debt problems in the country will have limited impact on the rest of the world.

The report also said a possible contraction in “shadowing banking” will be detrimental to businesses as general.

But Xu noted that China’s tighter supervision of the “shadow banking” sector will make it more transparent and better-regulated, which will reduce the potential risks in the sector.