Archives November 2014

Wal-Mart axes senior jobs, stores

Wal-Mart Stores Inc, the world’s largest retailer, has dismissed around 20 mid- and senior-level executives and closed stores in China as part of a restructuring aimed at countering growing pressure from local rivals and online retail sales.

The company said the measures will optimize the organization.

“As we have previously stated, we are transforming our business to meet the needs of a rapidly changing market and customers. Reorganization has been a necessary business reality,” it said in a statement, adding that the jobs cuts have been agreed by mutual consent, with the company paying compensation in line with the laws and regulations.

The retailer also said it had shut some outlets and was remodeling dozens more as the overhaul continues.

It insisted, however, it was making “good progress” toward opening around 110 new stores across China between now and 2016, within a plan that also includes new distribution centers, and creating what it called “a highly efficient supply chain and enhanced compliance process”.

Wal-Mart, based in Bentonville, Arkansas, is facing stiff competition in China, and earlier this year also had to withdraw donkey meat products from sale in its stores after they were found to contain fox DNA.

Among the executives being sidelined are vice-presidents from its hypermarket business Wal-Mart China and its wholesale arm, Sam’s Club China, according to two Wal-Mart China employees, who asked not to be named. Others have been removed from divisions including merchandising and innovation, they said.

Many of the dismissed have at least 15 years’ working experience, according to local media reports.

“This is a sign that Wal-Mart is facing more competition as well as cost pressures,” said Ben Cavender, principal of the Shanghai-based China Market Research Group.

“This looks like an attempt to streamline their operations, to cut costs and become more efficient.”

The current overall economic climate as well as the fallout from bad publicity from its own and other food safety scandals are also hurting the brand, said Cavender, while at the same time competitors are becoming more efficient and competing more aggressively.

Jason Yu, general manager of consumer information organization Kantar Worldpanel China, said the US retailer has seen a relentless growth in competition from local retailers as well as from e-commerce.

He said e-commerce now accounts for a 3 percent share of total fast moving consumer goods sales and continues to record incredible growth.

“This is achieved at the expense of modern trade retailers, especially in the first- and second-tier cities,” he said.

Other Wal-Mart restructuring efforts included its integration of nearly 30 purchasing offices into eight regional purchasing offices in November 2012.

The company reported a 0.8 percent fall in China sales during the quarter to Oct 31, which it attributed to government austerity measures and deflation.

Net group urges operators to step up controls on apps

Mobile network operators and smartphone application providers in Beijing drew up an agreement on Wednesday to enhance internal controls, improve supervision of the content of apps and keep the industry in good order.

The growth of mobile technology has brought a great deal of convenience for users who surf the Internet or keep in touch via social media networks while on the move.

However, smartphone applications with security gaps, or that are used to spread rumors and pornography, have created problems, according to the Beijing Internet Association.

The association, in an effort to tackle such problems and clean up the industry, has urged 50 mobile network operators and application providers across the capital to sign the agreement.

The document calls for stricter inspections of apps before they are uploaded to online stores.

Zhang Yuejin, director of the association’s information security committee, said the agreement is intended to maintain a fair competitive environment in the industry, while encouraging Internet giants to behave in a more socially responsible way instead of focusing only on earning money.

Net group urges operators to step up controls on apps

China had 632 million Internet users at the end of June, including 527 million who access the Web from mobile devices, and the total is expected to rise to 850 million next year.

“Smartphone applications represent the most advanced Internet technology, so the information they carry and the degree to which they are safe will affect the future development of the industry and people’s lives,” Zhang said.

Xu Xiaolong, deputy manager of the app store run by smartphone maker Xiaomi, said his team spends a considerable amount of time removing applications with unacceptable content every day.

“Apps with pornographic content are the ones our inspection team deletes most frequently, followed by ones that steal money from users,” Xu said. At least 200 requests for apps to be removed from the store are received every day, he added.

“If we find someone who uploads unacceptable apps five times, he is put on a blacklist,” he said. “Some apps are found to have problems after they pass through our inspections, which requires us to increase checks on the updated contents.”

Yu Dan from search giant Baidu said he supports the improvement of internal controls by mobile network operators, and added that the agreement is timely.

The Cyberspace Administration of China, the nation’s Internet watchdog, said at the beginning of the month that it is working on guidelines for smartphone applications to ensure that the industry develops in line with the law.

Tong Liqiang, director of the authority’s Beijing branch, said then that the guidelines were among a number of rules for the Internet that the organization is studying.

Yu said, “Wednesday’s agreement is a timely measure that can be said to echo the decision to draw up app guidelines.”

Yang Hongpeng of security software provider Qihoo 360 said stricter inspection of apps by companies could reduce security risks online. However, he said the city’s government should establish uniform standards for the removal of apps.

Wal-Mart lays off 30 execs

Retailing giant Wal-Mart Stores Inc said Wednesday it has laid off some 30 senior executives in its China unit in an effort to “streamline and simplify” its business, Bloomberg reported.

The departure of these executives is “consistent with actions taken over the last several months,” Ray Bracy, Wal-Mart’s China spokesman, said in an e-mail reply to Bloomberg.

This is not the first time Wal-Mart has decided to downsize its workforce in China. In March this year, employees at Wal-Mart store in Changde, Central China’s Hunan Province, launched a protest as they were unsatisfied with the company’s employee resettlement plan, news portal 163.com reported Wednesday.

Battle looms over mobile pay systems

China’s thriving mobile payment market will witness a new battle for dominance between Apple Inc and its local smartphone rivals, with industry insiders anticipating a direct showdown between Apple Pay and a home-grown digital wallet service in late 2015.

Analysts said the Android Pay project, which is led by Shanghai-based bankcard association China UnionPay, will have widespread support from Chinese handset vendors.

These vendors sell about 300 million Android operating system-based phones each year in the country.

Citing anonymous sources, Shanghai-based newspaper China Business News reported on Tuesday the proposed service will be launched in the third quarter of 2015 and UnionPay is seeking partnerships with local smartphone manufacturers.

UnionPay would not confirm the existence of the Android Pay project, but it did express an interest in establishing a new payment service.

In a statement to China Daily, the company said: “We have been constantly trying new technologies and business models in the mobile payment sector.”

Established in 2002, UnionPay has about 400 domestic and overseas members.

Wang Yanhui, secretary-general of the industry organization Mobile China Alliance, said in his micro-blog account that UnionPay had decided to team up with local handset makers as early as last week.

Major smartphone makers, including Xiaomi Corp, Lenovo Group Ltd and ZTE Corp, had not announced any such arrangements as of Tuesday.

Sources from Lenovo’s supply chain told China Daily that the company is developing a new phone equipped with fingerprint unlocking capability. The feature can be used as a substitute for entering passwords before transactions.

Only a handful of local smartphones support near field communication, a technology used in wireless handset payment services. Virtually no brick-and-mortar stores in China have installed cashier systems that accept NFC-enabled payments.

NFC is not popular even in the United States, where Apple first deployed its wireless payment service known as Apple Pay. The service is available only in selected stores in the US, including McDonald’s Corp restaurants and department stores run by Macy’s Inc.

Popular retailers such as Best Buy Co Inc (electronics), Wal-Mart Stores Inc and two major pharmacy chains (CVS Health Corp and Rite-Aid Corp) do not accept Apple Pay.

Over the past week, Apple announced it had started to accept online payments made through UnionPay cards at its Chinese mainland app store. The US-based company subsequently kicked off a UnionPay-customers-only promotion campaign by lowering the download price of more than 100 apps to 1 yuan (16 cents).

Analysts speculated this move meant Apple would soon launch Apple Pay on the Chinese mainland.

According to industry consultancy Forrester Research Inc, Apple Pay’s technology will accelerate payments and enable new customer experiences in the coming year.

“China and Australia will run ahead with Apple Pay on mobile (in 2015),” Forrester said.

It also said that the mobile payments landscape in China and other Asia-Pacific markets would remain fragmented over the next year. Wang said the official Apple Pay launch in China is likely in March 2015.

Li Ye, a researcher from Analysys International, said that with China opening up the bank card clearing market, UnionPay’s position as the only bank card organization is being challenged.

“Quick emergence of third-party online transaction channels forced UnionPay to find new business models suited to the mobile Internet era,” Li said.

The mobile transaction volume of third-party platforms exceeded 2 trillion yuan in the third quarter of this year, a jump of 25.6 percent year-on-year, statistics from Analysys International show.

“Although Apple Pay has yet to enter the Chinese market, it has heightened local players’ interest in mobile phone payments and NFC technology,” it said.

Shanghai vows to build international insurance center by 2020

Shanghai’s municipal government announced plans to create an advanced insurance market that meets the demand of economic and social development for the metropolis, with plans to make itself an international insurance center by 2020.

The insurance penetration rate, or premiums as a share of GDP, has goals to rise by six percent and the insurance density, the per capita premium, will reach 7,300 yuan (1,189 U.S. dollars) in the city by the year of 2020, according to the detailed enforcement proposal released on Tuesday to implement the State Council’s plans of speeding up development of the modern insurance services.

Taking advantage of the Shanghai Pilot Free Trade Zone, the municipal government pledged to accelerate system innovation and opening up of the insurance sector in the proposal.

Shanghai will also highlight the insurance sector’s functions in building an international financial center and shipping service center, and increase the role of insurance in promoting social security.

Merger plan lifts BesTV, Oriental Pearl

Shares of Shanghai-based BesTV New Media Co and Shanghai Oriental Pearl Group surged on news that the two companies would merge as part of the city’s push to reform state-owned media companies.

BesTV is merging with Oriental Pearl through a share swap with one share for every 3.04 shares of the target company, valuing the latter at 10.69 yuan (US$1.74) per share, according to a stock exchange filing yesterday. BesTV surged by the daily limit of 10 percent to 35.19 yuan.

Oriental Pearl would be delisted on completion of the deal. The company’s shares also jumped 10 percent to 12.01 yuan yesterday.

BesTV will also acquire companies such as SMG Pictures, Wings Media, Shanghai Interactive TV, and TV shopping company Oriental CJ through a private placement at 32.54 yuan per share to cement its market position and diversify revenue streams.

“Through the acquisition, BesTV now covers the whole industry including content production and Internet distribution channels, and it fits with China’s reform and consolidation in the media sector,” China International Capital Co said in a research note yesterday.

BesTV will also issue new shares to raise up to 10 billion yuan through a private placement with 10 institutional investors, including Shanghai Media Group Investment Center, the Bank of Communications Culture Investment Fund and China Merchants Fund.

Part of the capital will be used to fund Internet TV projects at the new entity after the completion of the merger.

Parent Shanghai Media Group will remain the controlling shareholder of BesTV with 45.07 percent after the merger.

Market needs say in pricing meds

The National Development and Reform Commission (NDRC) has lowered drug and medicine prices more than 30 times over recent years. Yet some drugs are still being sold at inflated prices, while other low-cost medicines are often in short supply.

As in all markets, pricing is a key factor in the sale of medicines as it naturally affects the supply and demand of various products. The NDRC’s decrees alone cannot effectively lower medicine prices because the commission’s regulations clash with the natural order of the drug market.

Regulators must give more leeway to drugmakers when it comes to setting the prices of their products. This is not to suggest that proper supervision is unnecessary with various factors affecting prices. While the government does have a responsibility to regulate prices of electricity, water, medicine and other services and commodities that are closely related to the public good, allowing the market to play its role in resource allocation is essential in coordinating the healthy development of the drug industry. Only by granting more discretion to drugmakers will efforts to reform the medical industry truly be realized.

App developers given Google platform

The Google Inc stand at a mobile Internet expo in Beijing. The search provider has started to allow app developers in China to sell items through Google Play.

Google Inc is making its most aggressive move on the Chinese mainland since a high-profile exit from the market nearly five years ago.

The Internet giant said on Thursday that it has started to allow app developers in China to sell their products through Google Play, an online app store installed in more than 1 billion Android smartphones worldwide.

Industry sources speculated that Google is preparing for a more significant move that would let Android phone users in China download apps from the store, which cannot be done at present in the world’s biggest smartphone market.

Google was careful in phrasing its app announcement because the move could potentially make available the first major Google service in China since early 2010. After months of skirmishing with local regulators over information security, Google gradually withdrew its core services from the mainland in that year.

Google’s products, including its online search engine and mapping service, are not available on the mainland.

“Today we are simply opening Google Play to Chinese developers and giving them the ability to bring their applications to a global audience?just like what we’ve done in more than 60 other countries,” Google said in an e-mailed statement to China Daily.

Developers in China will be able to sell apps via Google Play in 130 overseas markets. Google will help developers collect revenues from in-app purchase and subscription services. The revenues will be transferred to developers’ Chinese bank accounts.

App developers in China had to find an overseas agent to manage the payments in the past.

Chris Yerga, Asia-Pacific managing director of Google Play, said: “Chinese developers will be able to explore global business through the Android platform. They will have a chance to build a real international business.”

Also on Thursday, US tech website The Information reported that Google intends to introduce a version of Google Play to China in hopes of tapping into a market that accounts for about half of the global population that is using the Google-developed Android operating system.

“The company has indicated its intention to reverse a longstanding Google policy and distribute its app store with phonemakers and other potential partners in China,” said the report, citing an unidentified source.

Google declined to comment.

Wang Jun, a senior analyst with Beijing-based consultancy Analysys International, said Google has already missed the key window of opportunity to return to the Chinese app market.

“Local players are taking firm control over the Android app-distribution market. There is not much room left for Google Play,” Wang said. He said that most Chinese smartphone producers do not pre-install Google Play on their devices, making it harder for the service to reach out to customers.

Baidu Inc, Qihoo 360 Technology Co Ltd and wandoujia are the country’s top three app distributors, according to the China Cloud Degree Registration Center, an app distribution monitoring organization. The three platforms handled more than 70 percent of the country’s total game app downloads as of August, the center said.

According to Google, more than 1 billion Android devices, including smartphones and tablets, are installed with Google Play globally. The app store now has more than 1 million utility and gaming apps with total downloads exceeding 50 billion.

Apple Inc, who operates Android’s rival system iOS, is also trying to grab more revenue in China. The company teamed up with local bankcard association China UnionPay in an attempt to spur app sales and to bundle more bankcards. It is launching a promotion campaign on the mainland by lowering some of the apps’ prices to 1 yuan (16 cents).

Chinese yuan-linked financial products rise in S Korea

The Chinese yuan-linked financial products rose in South Korea ahead of the launch of a market where currencies of the two countries would be traded directly and the implementation of a bilateral free trade agreement (FTA).

Shinhan Bank, one of South Korea’s four leading banks, said Thursday that it rolled out the yuan deposit product, named China Plus Time Deposit. It has five maturities, including one month and a year, and the deposit rate was set at 3.15 percent.

Hana Bank and Korea Exchange Bank launched a joint yuan deposit product with a maturity of six months and a year earlier this month. The deposit rate was more than 3 percent.

The yuan deposit rate almost doubled the rate of the South Korean won-denominated deposits offered by local banks. The won deposit rate stays at a mid- to upper-bound of 1 percent.

The rise in yuan-related financial products came as the two countries are expected to implement the bilateral FTA next year. South Korea plans to launch the direct trading market between the yuan and the won within this year.

A South Korean news media reported that the financial regulator plans to increase the portion of yuan settlement in trade with China to 20 percent in the long term.

In 2013, South Korea and China traded 228.8 billion U.S. dollars of goods and services, among which 1.2 percent was settled with the Chinese yuan.

Wuzhen to host World Internet Conference

The World Internet Conference, which will take place in Wuzhen, a town in East China’s Zhejiang province, on Wednesday, has attracted more than 1,000 participants from across the world.

The conference, held from Wednesday to Friday, will focus on several hot issues in the cyberspace, including cyber security, online anti-terrorism crackdown, mobile network and cross-border e-commerce.

It is the first time that China is holding such a top-level conference related to Internet. Guests include government officials from various countries, cyberspace specialists and technology enterprises tycoons, such as Zhou Hongyi, head of Qihoo 360, Chinese largest security software manufacturer, and Jack Ma, the founder and board chairman of Alibaba, China’s largest e-commerce business.

According to the organizer, the Cyberspace Administration of China, the country’s top Internet watchdog, the meeting has also attracted almost 700 journalists from the world and 500 volunteers have been deputed to serve the guests.

In addition, participants can enjoy fast-speed free Wi-Fi in Wuzhen, and the town will become the permanent place to hold the conference in future.