Archives 2015

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.”

Realty growth sinks to single-digit level

A man inspects a property model display on June 14, 2014 in Rizhao, Shandong province.

Housing sales remain soft despite several policy easing measures announced by government

First-quarter investment in the real estate industry plunged to the lowest point in nearly six years, according to data released by the National Bureau of Statistics on Wednesday.

Investment in the property sector, a pillar of China’s fixed-asset investment, expanded by 8.5 percent year-on-year, dipping from 10.4 percent in the first two months.

The pace of growth was the weakest since July 2009, which was the aftermath of the global financial crisis, and a far cry from the 30 percent-plus rates recorded just four years ago.

In the previous property downturn, which occurred in the second and third quarters of 2012, growth rates remained above 15 percent.

“China’s property sector is still in a bad way. Prices continue to slide. Without a turnaround in loan growth, it’s difficult to see a rebound in real estate,” said Tom Orlik, chief Asia economist of Bloomberg.

Statistics suggest that investment growth in the sector is set for further slowdowns, which would drag down overall economic growth.

For example, funds raised by developers in the first quarter contracted 2.9 percent year-on-year, while new housing starts plunged 18.4 percent.

Yu Bin, a leading scholar with the Development Research Center of the State Council (cabinet), told a news conference earlier that real estate investment growth will decelerate further from 10.5 percent last year to about 7 percent this year. That would be about the same pace as the target for GDP growth.

In the longer term, property investment growth will stabilize in the 7 to 8 percent range, he said.

Investment is a lagging indicator that usually runs about three months behind changes in actual home sales, experts said. Given that relationship, last month’s sales performance implies that investment will stabilize in the second half of this year.

First-quarter housing sales by area fell 9.8 percent, the NBS said. That was a big improvement from the whopping 17.8 percent contraction in the first two months.

Calculations by China Daily show that in March, home sales were just marginally below the year-earlier levels: 0.9 percent down by area and 0.2 percent lower in value.

The NBS does not provide single-month data.

However, policy loosening in late March failed to ignite sales, to the surprise of many observers. After a soft patch in the first week of April, sales in the second week continued to fall.

According to the China Index Academy, the research branch of SouFun Holdings Ltd, sales in the 38 cities it monitors fell 11.2 percent last week, compared with the previous week.

In late March, the central bank said that commercial banks could reduce their minimum down-payment requirements to 40 percent from 60 percent for buyers of second homes who have outstanding mortgages on their first homes.

Separately, tax authorities said that individuals selling an ordinary home would be exempt from the usual 5.5 percent tax if they had owned that unit for more than two years, down from five years previously.

The housing authorities also said that the government would curb land supplies in second-and third-tier cities in an effort to rein in oversupply there.

Ding Zuyu, president of China Real Estate Information Corp, said that several factors had undermined the effectiveness of the policy changes.

For one thing, the Qingming (tomb-sweeping) festival is considered an inauspicious time to buy a home. The holiday fell from April 4 to 6.

Another factor, according to Ding, is that the implementation of the support policies is taking time to trickle down to the local level. Further, supplies of new apartments dwindled during the festival.

As the policies take effect nationwide, their impact will be fully felt starting from the second half of April, he said.

Chinese household income continues to grow in Q1

The average per capita income of Chinese households continued to rise in the first quarter of the year, the National Bureau of Statistics (NBS) said Wednesday.

Average per capita household income rose 9.4 percent year on year to 6,087 yuan (992.30 U.S. dollars), recording 8.1 percent growth after inflation.

The household income growth rate for 2014 was 8 percent.

Per-capita disposable income for urban people hit 8,572 yuan, up 8.3 percent. The growth rate was 7 percent in real terms.

Disposable income for rural residents stood at 3,279 yuan, up 10 percent. In real terms, it climbed 8.9 percent.

The income gap narrowed with urban residents earning on average 2.61 times more than their rural counterparts, down from a calculation of 2.66 in the same period last year, according to the NBS spokesman Sheng Laiyun.

Income growth surpassed gross domestic product (GDP) growth in the first three months, which clocked in at 7 percent, down from the 7.3 percent registered in the fourth quarter of 2014.

This still meets the official annual growth target of around 7 percent for 2015.

China created 3.2 million new jobs in urban areas in the first quarter, said Sheng, adding an NBS survey showed that China’s urban unemployment rate was “stable” at around 5.1 percent, unchanged from the rate in 2014.

The consumer price index, the main gauge of inflation, in the first quarter averaged 1.2 percent, the lowest since the fourth quarter of 2009 and lower than the government target of 3 percent, NBS announced Friday.

Huawei aims high with innovation, entrepreneurship

From a company on a shoestring budget at the time of its founding to a world renowned telecommunications giant, Huawei Technologies proves that commitment to entrepreneurship and innovation pays off.

“The only reason why Huawei exists and flourishes is its aim to better serve customers,” said rotating CEO Hu Houkun.

“The only way for Huawei to win the market’s trust and respect is through diligence,” Hu said.

Founded in 1987 with a registered capital of 21,000 yuan (3,400 U.S. dollars), Huawei took only eight years to achieve an annual sales of 1.5 billion yuan.

In 2004, Huawei launched a subsidiary in Britain. Within three years, it had orders from Germany, France, Italy and Spain.

At the end of March, the company reported a 32.7 percent increase in profits in 2014 to 27.9 billion yuan. Its revenue grew to 288 billion yuan, up 20.6 percent.

The growth was due partly to Huawei’s development of consumer business, mainly smartphone sales. Consumer business revenue hit 75.1 billion yuan last year, up 32.6 percent.

A close look at the company’s track record reveals the main driver behind its growth is its attention to innovation and research and development (R&D). In 2014, 40.8 billion yuan went on R&D, 29.4 percent more than in 2013 and 14 percent of revenue.

In the past decade, Huawei has spent more than 190 billion yuan on R&D. Among its 150,000 employees, more than 45 percent are engaged in innovation, research and development.

Huawei has been granted 36,511 patents and currently holds over 170 key positions in major international standards organizations, driving the improvement of industry standards.

“Huawei endeavors to offer the people of the whole world, especially in developing countries, fast and convenient connections at an affordable price.” Hu said.

Huawei’s ascent has not been free from obstacles: popularity breeds suspicion. Security forces in the U.S. and the UK accused the company of spying, but Huawei has been cleared through lack of evidence.

The UK’s Huawei Cyber Security Evaluation Center, which includes representatives of the British government and intelligence services concluded in a report published at the end of last month that “any risk to UK national security from Huawei’s involvement in the UK’s critical networks have been sufficiently mitigated.”