Archives April 2015

Wal-Mart to open 115 new stores in China

U.S. retail giant Wal-Mart Stores Inc plans to open 115 new outlets by 2017 and remodel more than 50 others this year to offset slowing growth in China, a top company executive said on Wednesday.

“Over the next three years, we will increase investment across our business operations in China, as the country is a top priority for us,” Chief Executive Doug McMillon told reporters at a news conference in Beijing.

The expansion of Wal-Mart, almost one-third by presence in China, is part of the company’s multi-format strategy, which will include super centers and Sam’s Club formats in cities such as Shanghai, Shenzhen and Wuhan from 2015 to 2017, creating more than 30,000 jobs.

The U.S. retail chain has spent 600 million yuan ($96.8 million) to remodel more than 90 stores and now plans to invest more than 370 million yuan to upgrade 50 stores this year to better serve the Chinese customers, McMillon said.

The move came after top global retail giants such as the United Kingdom-based Tesco Plc and France’s Carrefour SA, found the going tough in China, especially due to slowing economic growth and hot competition from online grocery stores.

Last year, Carrefour closed eight stores, while German retail giant Metro AG said it was closing its consumer electronics business in China. Tesco reported 5.74 billion pounds ($8.6 billion) of net losses, its biggest annual loss in its 96-year history.

Though online grocery businesses have changed the way consumers shop for goods, McMillon said he believes that physical stores would continue to prosper. “Some people may prefer to shop online, but some shop for fun, and they like to select fresh food for themselves, or maybe they want to go out anyway,” he said.

Raymond Bracy, Wal-Mart China’s senior vice-president of corporate affairs, said that an expanding middle class is encouraging for Wal-Mart to move into the emerging third-and fourth-tier cities, adding that the company would also push for further development of e-commerce.

The retail giant’s purchase of a majority stake in the Chinese e-commerce company Yihaodian has been approved by regulators in August.

Since its entry into China in 1996, Wal-Mart has opened 412 stores in 165 cities and partnered with nearly 20,000 local suppliers.

China to adjust resource tax and fees

China will reform the resource tax of several natural resources and cut unnecessary fees starting from May, according to a statement released after a State Council executive meeting presided over by Premier Li Keqiang on Tuesday.

Resource taxes of rare earth, tungsten and molybdenum will be levied according to price instead of quantity. Reasonable tax rates will be worked out with no more tax burdens on enterprises.

Meanwhile, the central government will exempt mineral resources compensation fees, and ban illegal charges on the three resources by local governments below the provincial level.

The three resources will also be exempt from export tariffs from May,the Ministry of Finance announced last Thursday.

Nepal quake may dampen China trade

Tibet exports to South Asia affected by blocked route

The 8.1-magnitude earthquake that struck Nepal on Saturday and killed over 4,000 people may dampen the Sino-Nepalese bilateral trade, an expert said on Monday.[Special coverage]

Sino-Nepalese bilateral trade might substantially decline in the short term, as a major trade route between China and Nepal had become blocked after the earthquake, said Hu Shisheng, director of Institute of Asian and African Studies at China Institutes of Contemporary International Relations.

The trade route, namely the Sino-Nepalese Highway and opened to traffic in the 1960s, connects Lhasa, capital of Southwest China’s Tibet Autonomous Region and Kathmandu, capital of Nepal.

The Xinhua News Agency reported on Saturday that a section of the highway, from Nielamu to Khasa, two towns on the border of Nepal and Tibet, had been blocked by landslides caused by the earthquake.

Hu told the Global Times on Monday that the possible slide in the Sino-Nepalese bilateral trade would not strongly affect Nepal’s economy, but it might seriously impact Tibet’s economy.

Hu said that Nepal might increase reliance on Indian imports to make up for the loss of imports from China. But “most of the commodities in Tibet have been exported to South Asia via Nepal. When the major route between Tibet and Nepal is cut off, Tibet’s export market will be almost completely destroyed,” said Hu.

The Xinhua News Agency reported in January that Tibet’s exports to Nepal had reached 10.65 billion yuan ($1.72 billion), which accounted for 91.15 percent of the overall trade value in Tibet.

However, an employee of the board of trade of the Tibet local government told the Global Times on Monday that the earthquake “has had little impact” on the bilateral trade between Tibet and Nepal.

Apart from the Sino-Nepalese Highway, another roadway between Jilong, a Tibetan town and Rasuwa, a Nepal district, had also been affected by the earthquake.

The roadway was officially put into use in December 2014 and could connect Tibet and Kathmandu.

But the National Development and Reform Commission released a message on Sunday that a section of the Jilong-Rasuwa roadway had been reopened.

Hu said the Jilong-Rasuwa roadway was in better condition than the Sino-Nepalese Highway. He suggested that the roadway should be improved so it could replace the Sino-Nepalese Highway in trade.

He also said that China’s humanitarian aid to quake-hit Nepal could be seen as an opportunity for China to increase infrastructure investment in Nepal in the future.

According to a China Trade News report on April 24, Sino-Nepalese bilateral trade had reached $2.33 billion in 2014, up 3.38 percent year-on-year. China’s exports to Nepal surged 3.28 percent to $2.283 billion in 2014, while Nepal’s exports to China rose 8.5 percent to $47 million.

Alibaba, China Telecom tie up to sell phones

Chinese e-commerce leader Alibaba Group Holding Ltd and State-owned China Telecom Corp Ltd have tied up to sell inexpensive smartphones aimed at boosting mobile commerce in smaller cities and rural areas.

The phones, dubbed “Tianyi Taobao Shopping Handsets,” will come installed with either an app for easy access to Alibaba’s flagship Taobao online shopping platform or its home-grown YunOS mobile operating system, Alibaba said in a statement late on Friday. Buyers will be eligible for four months of free 2G data service.

The partnership is a bid to deepen Alibaba’s e-commerce base in less developed parts of the country and promote its mobile operating system in a shrinking, cutthroat handset market.

Six models produced by Coolpad, Hisense and TCL will come with the Mobile Taobao app pre-installed.

Mobile Taobao is China’s most popular mobile shopping app with more than 200 million monthly active users, the statement said.

Another eight models, made by less-known brands including Uniscope, Ctyon and Kingsun, will run YunOS, providing buyers with an Alibaba account for shopping and cloud-based storage, and other services, the statement said.

Some 557 million people in China access the Internet via mobile devices, according to government data.

But shipments in China were 389 million phones in 2014, down from 423 million the previous year, according to China’s Ministry of Industry and Information Technology.

In January, Alibaba said the number of mobile monthly active users nearly doubled in the third quarter from the same period the previous year to 265 million.

The proportion of its gross merchandise volume derived from mobile also grew.

Alibaba says it has an 86 percent share of China’s mobile commerce market.

In February, Alibaba announced that it was taking a $590 million stake in Meizu, a relatively obscure domestic smartphone maker.

China employment growth slows in new precedent

Growth in the number of people employed in China’s urban areas slowed for the first time since the global financial crisis in the first quarter of 2015, the Ministry of Human Resources and Social Security (MOHRSS) said on Friday.

January-March, China’s employed rural population grew by 3.24 million, 200,000 less than the same period last year, MOHRSS spokesperson Li Zhong said at a press conference.

FTZ to cut travel time within Pearl River Delta

Nansha to spearhead financial reforms, service sector growth, green urbanization in Guangdong

By 2017, it will take only 30 minutes to go from Nansha, which lies at the estuary of the Pearl River, to Hong Kong or Macao.

The area is improving its transportation infrastructure now that it has been designated as part of the China (Guangdong) Pilot Free Trade Zone.

Nansha, a southern coastal district of Guangzhou, the capital city of Guangdong province, is 70 kilometers from Hong Kong, 89 km from Macao and 111 km from downtown Guangzhou. With an area of 783 sq km, similar to Hong Kong or Singapore, it is located in the center of the Pearl River Delta Region, a major coastal economic center adjacent to the Yangtze River Delta Region.

Within the district, 60 sq km comprising seven separate sites have been designated as part of the Guangdong FTZ, which was approved by the State Council last December as one of the nation’s four FTZs.

Nansha FTZ is the largest area among the three regions that form the Guangdong FTZ. The other two are Hengqin Island in Zhuhai and Qianhai in Shenzhen, with geographical proximity to Nansha.

“The positioning of Nansha as part of the Guangdong FTZ is that it will be built into the central business district in the Pearl River Delta Region connecting … Guangdong, Hong Kong and Macao,” said Wang Wei, chief planner of the Nansha office of the Guangzhou city planning bureau.

According to Wang, 120 km of high-speed roads have already been completed, out of 200 km in the development plan of Nansha. Those roads include a ring road around Guangzhou, one that connects the area with Hong Kong and Macao, and a highway-rail bridge connecting Shenzhen and Maoming.

“The Nansha zone is going to be the experimental area of Guangdong’s endeavor in industrial modernization, financial reform, service industry development and environment-oriented urbanization,” noted Wang. “In particular, it is the central region for the integrated development with Hong Kong and Macao.”

“By 2017, when most of the transportation routes have been built, it will take only half an hour to go from Nansha to Hong Kong or Macao,” said Wang.

Jiaomenhe, an area in central Nansha that covers a mere 3 sq km, will be the service center for foreign investment in the FTZ. A total of 5 million square meters of floor space has been planned for companies’ headquarters, particularly small and medium-sized enterprises.

“In my view, an FTZ should just be like Hong Kong,” said Wu Yunyuan, the owner of an Australian wine import company, which registered in Nansha right after the Guangdong FTZ was approved by the central government in December 2014.

“One of the biggest attractions of Hong Kong is its duty-free products. I believe Nansha will soon offer duty-free products too,” said Wu. “Moreover, I appreciate the efficiency of the FTZ in administration. It took only one workday for me to change my company’s main business from wine import from various countries to exclusively from Australia.”

The Nansha Harbor in the north, measuring 5 sq km, was originally developed in the 1990s by the late Henry Fok Ying-tung, a Hong Kong tycoon, into a leisure service area. The harbor has 300 yacht berths, and two cruise home ports are being planned.

According to Wang, the establishment of the Guangdong FTZ is driving demand for the office buildings under construction in Nansha.

“We noted surges in property sales in Nansha last November and December,” said He Ling, head of the market research department of Savills Property Services (Guangzhou) Co.

“The FTZ is definitely going to benefit the housing market in Nansha in the long run if the planning and development are well implemented.”

Guangdong is the first province that released a general development plan within the framework of the national “One Belt, One Road” strategy. The plan lists more than 10 projects for the first three years starting from 2015, including the construction of a power plant in Vietnam and metals investments in Australia.

“Nansha will benefit from the ‘One Belt, One Road’ strategy not in terms of economic growth but in terms of experiments that will be able to be carried out in the district,” said Guangzhou Mayor Chen Jianhua.

The GDP of Nansha last year was 100 billion yuan ($16.3 billion), accounting for only one-17th of the overall GDP of Guangzhou province.

“However, it plays a crucial role in the province’s economic modernization, particularly now that (there is) an FTZ. The new economic rules, the business environment, the transformation of industry and the introduction of international standards practiced in Nansha, if successful, will be quickly promoted in the rest of Guangdong province,” said Chen.

Largest coal firm in NE China struggles to cut losses

The largest coal mining group in northeast China is struggling to reduce its losses and pay thousands of its employees.

Heilongjiang Longmay Mining Holding Group Co. Ltd., suffered around 5 billion yuan (815 million U.S. dollars) in losses last year due to the drop in coal prices, the exhaustion of mines and high production costs.

With 240,000 employees, the state-owned firm has subsidiaries in Jixi, Hegang, Shuangyashan and Qitaihe in Heilongjiang Province. The group started management restructuring last year in an attempt to give its subsidiaries more power to become self-operating market entities.

However, some managers have not been paid since last September, a senior executive of subsidiary Shuangyashan Mining Co. said on Tuesday.

Structural streamlining should be finished by August, which will reduce the number of administrative employees from 36,000 to 20,000.

The company will also expedite development of its coal-related chemical industries.

Longmay’s difficulties reflect the wider economic slowdown in Heilongjiang, which only grew by 5.6 percent last year, much lower than the national rate of 7.4 percent.

Economic growth in Jilin and Liaoning province was also weaker than the national average.

Earlier this month, Premier Li Keqiang urged northeastern regions to offer preferential policies to encourage innovation and entrepreneurship; to promote systemic reform in major state-owned enterprises; and support the growth of micro, small and medium-sized firms, including private enterprises.

“Due to shrinking coal demand and the company’s accumulated problems, Longmay faces losses and strained cash flow. However, it is thinking about ways to guarantee employees are paid,” an executive of the group told Xinhua.

Song Yufei, acting chief accountant of Longmay Mining, said the group would reduce costs and losses by improving management and follow up outstanding payments totalling 4.8 billion yuan.

In April, the provincial government loaned 500 million yuan to Longmay Mining and earmarked a special unemployment insurance fund of 500 million yuan and another 100 million yuan for those laid-off to find new jobs.

Foreign seed producers to be saddled with tough regulations in China

Chinese lawmakers are looking at limiting foreign access to the country’s seed production industry.

The Standing Committee of the National People’s Congress is now considering an amendment to make seed production part of the national security lexicon.

If passed, this would require seed producers or research firms with any foreign investment undergo new security assessments.

Foreign investment, mergers or technological cooperation by foreign companies with Chinese seed producers will also be strictly scrutinized.

The proposed changes come amid concerns in China about the production of genetically-modified foods.

Automotive industry’s profits take a tumble

China’s auto industry’s profits have been on a downward trend this year, plagued by a slowing market and plunging car prices.

The sector’s profits dropped by 5.4 percent in the first quarter from a year earlier, according to data from the National Bureau of Statistics.

This is the first quarterly profit decrease in three years, said Chen Xi, a senior analyst from the bureau’s China Economic Monitoring and Analysis Center.

The industry’s sales profit ratio slumped 0.6 percentage points to 7.9 percent in the first quarter of this year, from the last quarter of 2014.

Almost one-fifth of the automakers and spare parts producers in China were in the red, a 7 percentage point increase, according to the data.

“The hardship could be attributed largely to the market deceleration, car price cuts and growing marketing costs,” Chen said.

Total vehicle sales in China climbed by 3.9 percent to 6.15 million units in the first quarter, according to the China Association of Automobile Manufacturers.

Sales of passenger cars decreased by 0.36 percent to 3.10 million units and micro bus sales plunged by 17.84 percent to 32.64 million units.

A slew of carmakers cut prices this year in an attempt to boost sales amid the slowing market.

China’s top automotive group SAIC Motor slashed prices of its MG and Roewe models by 10,000 yuan ($1,600) to 20,000 yuan last week.

Shanghai Volkswagen?SAIC’s joint venture with Volkswagen?cut the prices of its Touran, Polo, Tiguan, Passat and Lamando models by as much as 10,000 yuan on April 5. The Lamando compact sedan hit the market just three months ago.

On April 11, Sino-US joint venture Chang’an Ford offered price concessions of 7,000 to 11,000 yuan by paying car purchase tax for buyers.

Hyundai Motor’s joint venture with Beijing Motor also started providing customers interest-free loans for two to three years earlier this month.

Analysts predict more carmakers will have to join the price war to boost sales later this year to survive.

Shi Jianhua, deputy secretary-general of the auto association, said the overall market downturn would push the auto industry to further polarize.

“Carmakers which have competitive products will continue to have decent profits, but those without competitive products will have meager profits and even losses,” Shi said.

According to the statistics bureau, fixed-asset investment in the auto industry has also slowed due to the market downturn.

Fixed-asset investment in the first quarter grew by 5.1 percent year-on-year. The pace is down 18.2 percentage points from a year ago.

Growth of employment in the auto industry also slowed to 3.9 percent in the same time period.

Chinese SMEs confidently join global competition

With increasing manufacturing capability and desires to expand their business, more and more Chinese manufacturing companies, especially small and medium-sized enterprises (SMEs), are looking beyond Chinese boundary to join global competition confidently.

At the ongoing Hanover Fair, the world’s biggest industrial trade show, nearly one sixth of the exhibitors, came from China.

“With years of investment in technology innovation and improvement in product quality, we feel that we have gained enough strength to compete with foreign companies. So we decided to get out and broaden market overseas,” said Li Wenguang, sales chief of a 400-employee manufacturer of reduction drives in China’s central Hubei province.

According to Li, the company, Hubei Planetary Gear Boxes, was founded in 2004 and had earned a strong market position in China. But it was not satisfied with the status quo and wished to gain more business.

It was the first time that his company attended a foreign trade fair.

Compared to Li’s company, Anyhertz Drive from Shenzhen, which started exporting five years ago, was more experienced in foreign business, as a quarter of the variable-frequency drive manufacturer’s total sales come from overseas.

“Our main foreign markets were in Southeast Asia and the Middle East. In Hanover, we wish to get more resources and expand our markets,” the company’s foreign business chief Ocean Wang said.

For some Chinese SMEs, the purpose of expanding foreign business is not just making money.

“We also wish to help promote our national brand and improve the reputation of ‘Made in China’,” said Yanbeen Deng, vice president of Sure Instrument from Tianjin.

” ‘Made in China’ does not mean low price and low quality,” Deng said, adding that the competitiveness of Chinese products increased tremendously in recent years thanks to Chinese manufacturers’ flexibility in providing services and increasing investment in research and development.

“We see more opportunities as our nation is more and more open to the outside world, and we are confident to join global competition and to win in foreign markets,” he said.

At the Hanover Fair, Chinese exhibitors could be seen in almost every exhibition hall.

“I feel that it is a very good strategy of Chinese companies to be here year by year continuously on the trade show,” said Jochen Koeckler, a member of the Managing Board of Deutsche Messe responsible for the fair.

“That is a strong signal that China is really willing to be more open, and is willing to be one of the industrial nations of the world.”