Archives 2014

Wal-Mart replaces CEO for China region in Asia leadership shuffle

US retailer Wal-Mart Stores Inc, the world’s largest retailer by revenue, has appointed a new chief executive for the China region, where the world’s largest retailer is battling stiff competition from local rivals.

Sean Clarke, a Wal-Mart veteran and current chief operating officer in China, will take over the China CEO role from June 1, a statement from the firm said over the weekend. The current China chief executive, Greg Foran, will become Asia CEO.

China is key to Wal-Mart’s international ambitions but it has stumbled in a market where consumers value safe and authentic food over the low prices the retailer is famed for. Wal-Mart has been in China for 17 years.

This year, Wal-Mart was embroiled in a scandal over tainted donkey meat. Workers also went on strike at some of its stores.

It is now changing its China approach, closing some big stores that never caught on with locals and focusing more on its own-brand products and imports, quality and safety.

Last week, the retailer announced a store closing in Hangzhou, provincial capital of East China’s Zhejiang Province, marking the seventh closure since March.

Clarke has been with the grocery chain for 15 years, including the last two in his current role in China overseeing areas from logistics and merchandise to marketing.

“Sean has been a key contributor to our improved performance in China. His experience and background uniquely prepare him for this role and will ensure continuity for our progress in China,” outgoing China CEO Greg Foran said in the statement.

Shanghai apartment sells for record $36.85m

A duplex at Tomson Riviera set a record in Shanghai for a single apartment when it sold for 228.5 million yuan ($36.85 million) Thursday.

The average price for the 986-square-meter unit in the heart of Little Lujiazui in Pudong New Area was about 231,000 yuan per square meter, also a city record.

The buyer had purchased an 824-square-meter duplex in the same development for 150 million yuan in November and has decided to replace it with the bigger unit, according to Oriental Morning Post, citing Bao Haifeng, director of sales at Tomson Group.

The Post didn’t say how much the buyer sold the 824-square-meter duplex for.

The city’s luxury housing segment has been stable this year. A total of 29 units, or 8,641 square meters of new homes with an average price of more than 100,000 yuan per square meter have been sold since January, according to Centaline Property.

A Sun Hung Kai Properties luxury residential project in Lujiazui saw nine units sold this year for an average price of 104,800 yuan per square meter, Centaline data showed.

The Bund House, a Greentown project in Huangpu District, recently offered a 690-square-meter duplex with an asking price of around 230 million yuan, or more than 333,000 yuan per square meter.

Chip maker targets China’s middle class

MediaTek Inc, a Taiwan-based mobile chip maker, is aiming at China’s growing middle class for increased sales of mid-price smartphones and wearable devices.

“The current market structure is about to change dramatically because of the enlarging middle class population and weaker phone subsidies from carriers,” said Johan Lodenius, chief marketing officer of MediaTek.

He estimated the number of users of mid-price smartphones in the market is set to triple in coming years as the global middle class nudges up to near 5 billion by 2030.

More than 65 percent of the population will come from China and other Asia Pacific economies, doubling from less than one-third in 2009.

Looking forward, the company will focus on more affordable mid-price devices, Lodenius said.

“Higher than $700 phone products are so expensive for customers,” he said.

Wearable devices powered by MediaTek chips are likely to be released later this year.

The company expects to release the world’s first eight-core LTE smartphone chip in the third quarter.

China is the world’s largest smartphone market followed by the US, and shipped close to 300 million smart devices last year, according to Wu Lianfeng, associate vice-president of International Data Corp China.

The Chinese market will see explosive growth in smartphone and tablet sales this year, primarily through telecom operator and online channels, according to the IDC.

MediaTek has been known as a low-end mobile chip maker. It was the world’s third-largest maker of chips in 2013 by shipment, following Qualcomm Inc and Broadcom Corp from the United States.

The company shipped more than 600 million smartphone chips in 2013, including 350 million for featured phones and the rest for smartphones and tablets.

Less than a month before MediaTek unveiled its attempt to enter a higher-end market, Intel Corp, maker of high-speed x86-based chips, announced it will provide cheaper products for Chinese original equipment manufacturers.

The move was believed to position the US company to gain market share.

Microsoft to seal takeover of Nokia’s handset business

Microsoft will complete its acquisition of Nokia’s handset business this Friday, according to a Microsoft’s statement, thus ushering a new chapter for Nokia.

In total, Microsoft will wrap up 5.4 billion euro ($7.5 billion) for the takeover this coming Friday.

“The completion of this acquisition follows several months of planning and will mark a key step on the journey towards integration,” Microsoft said in Monday’s statement.

Industry-watchers believe that this deal could open “a new chapter” for Nokia, rather than closing the book on the company.

With its market share greatly eroded, Nokia, once a giant of mobile phone business, fell victim of intense competition from its rivals Apple and Samsung.

Jobless rate 5.17 pct in march, survey says

China’s polled unemployment rate in March was 5.17 percent, slightly lower than in February, said Li Pumin, secretary-general of the National Development and Reform Commission, on Wednesday.

It was the first reference to the jobless rate since Premier Li Keqiang mentioned it in an article in the Financial Times in September.

Traditionally, the government publicizes the urban registered unemployment rate. That number has long been criticized as a biased and deflated one. It also has rarely changed, staying at about 4.1 percent since 2010.

As an alternative, the government has administered a monthly survey in 65 major cities. The number is currently available only to policymakers and has not been made public.

Premier Li said in September that China’s polled unemployment rate was 5 percent for the first half of 2013. Li Pumin did not elaborate on what the number was in February this year.

Citing the low unemployment and moderate inflation rates, Li Pumin said the economy is stable and healthy. As a result, the government does not foresee having to roll out stimulus measures.

Toyota sells more than 10 million vehicles globally in FY 2013

Japan’s Toyota Motor Corp. said Wednesday that its global group sales in fiscal 2013 gained 4.5 percent from the previous year to 10,133,000 units, becoming the first automaker whose annual sales topped 10 million units.

According to the corporation, the upbeat sales in the one-year period towards March were partly boosted by strong performances in North Korea and China. The consumption sales tax hike from April 1 also stimulated last-minute buying in domestic market.

The automaker also projects its group vehicle sales will total 10.32 million units in the next fiscal year.

Weibo makes debut on Nasdaq

Weibo Corp, Twitter Inc’s counterpart in China, made its debut on the Nasdaq in the United States on Thursday, becoming the first publicly traded Chinese social media company.

The micro-blogging service, owned by Sina Corp and Alibaba Group Holding Ltd, priced its initial public offering at $17 per share, which was at the bottom of its planned range between $17 and $19. It opened unchanged at the issue price.

The Beijing-based company, which began trading publicly under the ticker WB, said it hopes to sell 16.8 million Class-A American depositary shares, less than its original plan of selling 20 million shares.

The IPO would allow Weibo to raise up to $328.44 million in capital. Twitter Inc raised $1.8 billion from its IPO in November 2013.

Charles Chao, chief executive officer and chairman of the board of Sina Corp, said the setting of any IPO price is based on demand and supply in the stock market.

“Because of the recent downturn of the IPO market in the US, we are happy that we can still set Weibo’s IPO price at the bottom of our initial targeted range,” Chao said at an online media briefing to a group of reporters on Thursday night Beijing time, ahead of the IPO.

Weibo, which reported a monthly active user base of 144 million as of March this year, first filed for its IPO on March 14, joining seven other Chinese Internet companies seeking capital in the US. That doesn’t include China’s e-commerce conglomerate Alibaba, which is approaching a highly anticipated IPO in the US.

Alibaba agreed a year ago to buy a 19 percent stake in Weibo for $586 million and plans to exercise an option to raise that stake to 32 percent.

Weibo was established in 2009. The company has only been profitable in the fourth quarter of 2013. The company reported a net loss of $47.4 million in the first quarter of this year. This is more than twice the $19.2 million loss it posted in the same quarter last year.

Revenues of $67.5 million in the first quarter of this year were more than double the previous year’s, but they fell about 5.5 percent from the previous quarter. The company attributed the shrinking revenues to the seasonal effects of the Chinese Lunar New Year, saying the performance was in line with its expectations.

Analysts worried that Wall Street investors may not be as enthusiastic about Weibo as they were about Twitter’s IPO five months ago.

Tian Hou, chief analyst with T. H. Capital LLC, an independent research and investment advisory firm, said it was no surprise Weibo failed to reach its initial target of raising $500 million as it suggested it would in its Securities and Exchange Commission filings.

“The primary reason is the downturn of the overall stock market in the US. Many US-listed Internet companies, such as China’s e-commerce company Vipshop Holdings Ltd and China’s search giant Baidu Inc, saw their share prices drop in recent weeks,” Tian said.

Wang Xiaofeng, an analyst with US-based consultancy Forrester Research Inc, said Weibo missed the best time to go public because of the changing dynamic in the Internet industry in China, which has seen more powerful competitors emerging over the past year.

“We are all aware that it has been ‘beaten up’ by Tencent Holdings Ltd’s WeChat, which is the most popular messaging app in China’s mobile Internet sector,” she said.

According to Wang, the two platforms differ in their potential for public broadcasting and promotional use, to which Weibo is currently better suited.

“The biggest challenge for Sina Weibo therefore is finding a way to increase the targeting ability of its current advertising and provide more effective marketing offerings to marketers before they find alternative social platforms on which to market or before user activity drops further,” she said.

Zurich Insurance hunts for M&A targets in China

Swiss giant, attracted by possibilities for growth, seeking Shanghai branch

Zurich Insurance Co Ltd is actively seeking merger and acquisition opportunities in China to fuel its business expansion, a company executive said on Thursday.

“We are looking for appropriate M&A opportunities to boost our presence and expand our business scope,” said Stuart A. Spencer, chief executive officer of general insurance for the Asia-Pacific region.

He said Zurich adopted a “defensive” stance during the global financial crisis. Now, thanks to a solid balance sheet, the company wants to be more aggressive.

“We have no preference as to whether the target should be a domestic one or an international one having operations in China, but it should be a strategic and cultural fit with our business,” Spencer said.

Last April, the China Insurance Regulatory Commission approved the Swiss company’s plan to transform its Beijing branch into a wholly owned subsidiary, making it easier to expand across the country.

Spencer said the company has since submitted an application to the CIRC to open a branch in Shanghai.

Zurich General Insurance Co (China) Ltd generated premium income of 496 million yuan ($80 million) last year, up 16.6 percent year-on-year.

“We expect to maintain a growth rate no lower than that this year,” said Spencer. “And we aim to achieve a healthy profit margin within three years.”

China’s economic growth has been slowing, but Spencer said that the company is still extremely bullish on its business prospects in the nation.

“China’s economy remains very resilient, and it is incredible for the world’s second-biggest economy to maintain such rapid growth,” said Spencer.

The country’s economic restructuring to give consumption more of a role is good news for the insurance industry, he said.

According to Spencer, the company doesn’t plan to be the largest player in the market. “We aim to generate underwriting returns, and we will not be seduced by mere rapid growth,” said Spencer. “Massive scale never interests us, but we do want to be bigger than the scale we have right now,” he added.

The company is closely watching conditions in the vehicle insurance market, but its focus remains on liability insurance and special financial insurance, according to Spencer. Profit margins in vehicle insurance are regarded as not very attractive.

China’s continued urbanization and rising household wealth will sustain the growth dynamics in the country’s nonlife insurance sector, but intense competition will further weaken the sector’s underwriting margins in 2014, Fitch Ratings Inc said in a report.

In light of contracting underwriting margins, Fitch believes small insurance companies with limited operating scale and less diversified insurance books will post weaker operating results in the coming year.

Nonlife players are likely to see premium growth of 15 to 20 percent over the next 12 to 24 months, according a report by Standard & Poor’s Financial Services LLC.

But the segment’s performance can be volatile and subject to unexpected natural disasters. Inadequate pricing, or underestimated risk profiles, of commercial property and marine lines in China are likely to persist because of stiff competition, according to S&P.

Major listed Chinese nonlife insurers will still achieve growth in their underwriting surpluses, albeit at a slower pace, because of diverse revenue streams and better spread of risk.

“Ongoing business expansion coupled with slower surplus growth will continue to pose a strain on insurers’ capital adequacy, although many insurers improved their solvency adequacy through fresh equity injections or subordinated debt issues over the past year,” said Terrence Wong, director of insurance at Fitch.

Jaguar Land Rover aims for sustainable growth in China

This year the Jaguar F-TYPE gains traction in Chinese market.

Jaguar Land Rover China finished the first quarter of 2014 positively, with sales of more than 29,500 vehicles, marking a year-on-year growth of 36 percent.

Models with 3.0L engines and less made up about 98 percent of the sales, due to their fuel efficiency and enhanced performance.

In line with the healthy market development, Jaguar Land Rover is starting a new chapter of sustainable growth in China, with a focus on customer satisfaction.

“After our pivotal year in 2013 when China became both Jaguar and Land Rover’s single largest global market, this year we are glad to see continued growth as even more Chinese consumers appreciate our British brands,” said Bob Grace, regional president of Jaguar Land Rover Greater China.

“Moving forward, our customers remain at the heart of everything we do, as we target sustainable development in China. As we do so, we are also endeavoring to further our efforts to give back to the communities we operate in with our CSR programs,” he said.

Making drivers feel ‘alive’

With customers attracted to its “Alive” brand, Jaguar grew a healthy 49 percent year-on-year, selling more than 6,100 units.

Sales of consistent bestsellers, like the Jaguar XJ and XF, were driven by the appeal of the 2.0L I4 turbocharged and 3.0L V6 supercharged engine variants, which offer added efficiency without sacrificing performance.

This year, the dynamically capable, performance-focused Jaguar, the F-TYPE, also gained traction in Chinese market, as an all-aluminum two-seater sports car engineered for high performance.

Determined to “never stop achieving”, Jaguar plans to go even further in the market with new products and campaigns featuring new ambassador David Beckham who embodies the brand spirit.

Innovating premium SUVs

Land Rover strengthened its position as a world-leading premium SUV maker with its first quarter sales of more than 23,400 units, up 33 percent.

Popular models like the Freelander 2 and the Range Rover Evoque with the world’s first 9-speed automatic transmission, continued to lead the line-up.

The success of the all-new Range Rover and Range Rover Sport, which feature the lightweight all-aluminum monocoque body structure, prove that customers appreciate the benefits of advanced engineering and an enhanced driving experience.

As Land Rover celebrates 25 years of the Discovery, it will feature its Discovery Vision Concept Vehicle at the upcoming Beijing Auto Show.

Putting customers first

Leveraging its network of 248 authorized and 144 operational dealer partners throughout China, Jaguar Land Rover is committed to serving its customers as best it can.

As the automaker enters a period of sustained development in China, its “customer first” philosophy will continue to drive its foremost goal of delivering excellence, whether in products, services, or brand experiences.