Archives February 2016

New challenges emerge as more workers age

China has a huge number of migrant workers. They usually come from rural areas across the country, and work in cities to seek a better life.

This phenomenon came into being after China’s Reform and Opening up policy was introduced in the late 1970s. It meant a larger labour force was needed to meet the demands of the burgeoning economy. Now, as over three decades have passed, this specific industry faces new challenges and changes.

A new landmark for China’s capital. This building under construction will be the highest one in Beijing in two year’s time. It’s another masterpiece straight out of a designer’s hands, and a masterpiece by its builders as well.

Li Shaohua, now approaching his 50s, is one of them. He has worked for 20 years as a migrant worke and now he worries about his age.

“As I am getting older now. I would like to spend more time with my family. It’s no longer suitable for me to stay in this industry,” he said.

It’s rare to see a young face like Wu Chunxi at this construction site. There are less young workers in China, as a result of family planning policies. Wu says he won’t stay in this industry for long.

“I will stay in this industry for several more years to earn some money. Then I will go back home, start my own family, open a small business, and ensure a happy life for my family,” Wu said.

The average age of China’s migrant workers is higher than ever before. Of the 270 million across the country, nearly 20% of them are more than 50 years old. And their lack of education means it’s difficult for them to acquire new skills.

Li Shaohua graduated from a local middle school in central China’s Hubei province. He says, besides old age, he is also concerned about his education level.

“If I got a much higher education level, I would take a job in the management team. However, due to the lack of education, I could only work here as a worker,” Li said.

Wu Chunxi is luckier since his college education allows him to take a job as an electrician.

“The knowledge I picked up at school, along with the working experience here, makes me learn new things more quickly than others. I can read the circuit diagram, and I learn quite a lot of new things here,” he said.

China’s economy has entered a “new normal” development phase. It features slower growth but higher efficiency. Migrant workers, those that usually remain disadvantaged in terms of age and education are the first to be affected.

Starting from the latter half of 2015, many chose to return back home from cities. The number of returnees reached two million in November, 2015.

Li Shaohua is happy to talk about his plans for his retirement. He can either grow crops or start a business of his own. But one thing he is certain of is that he would encourage his son to get a college education….

China to allocate 100 bln yuan for job losses from capacity cuts

China will establish a 100 billion yuan (15.3 billion U.S. dollars) fund to assist those who are made redundant as a result of industrial restructuring, an official said Thursday.

Allocated over two years, the fund will cover training and job seeking, said Feng Fei, vice minister of industry and information technology, at a press conference.

The processes of dealing with poor-performing “zombie companies,” and undertaking mergers and acquisitions mean that job losses will be inevitable. Thus, re-employing workers will be a major task, Feng said.

Cutting overcapacity was listed as one of the five major tasks in supply-side structural reform along with destocking, deleveraging, reducing costs and shoring up weak growth areas.

The government has stepped up efforts to slash excess production capacity in saturated sectors, especially steel and coal. From 2011 to 2015, 91 million tonnes of outdated capacity in the iron industry and 94.8 million tonnes in the steel industry were eliminated.

Companies scramble to hire skilled labor

More skilled workers are needed in Dongguan, a traditional manufacturing base in Guangdong province, as local companies begin looking for qualified employees after Spring Festival to help transfer their businesses into the high-tech sector.

CKE-Tech, which focuses on production and sales of precision machinery, is looking for about 10 more engineers this year as the company increases its efforts in research and development.

“We are looking for more skilled workers, but it is really difficult to find the right ones,” said Chen Guiping, a human resource manager with the company.

The company will provide about 6,000 yuan ($920) per month for a skilled worker, higher than the previous year.

A growing number of manufacturing companies have increased investment in research and development in recent years, resulting in the need for more skilled workers and engineers, according to Chen.

CKE-Tech is one of the hundreds of businesses ranging from furniture, garments, electronics and toys that are transitioning from traditional manufacturing to more service-oriented models.

By Feb 17, more than 77 percent of Dongguan workers had returned to their jobs, according to the local human resource authority.

In the past, some companies could not begin factory operations after Spring Festival due to a lack of workers.

“But now, a growing number of local companies have introduced high-tech processing equipment, including robots,” said Li Guochen, a professor at Dongguan Polytechnic.

Some labor-intensive businesses, however, have still found it hard to recruit new workers.

According to the Dongguan human resources authority, companies involved in shoes, garments and plastics have a relatively larger shortage of labor for their processing lines.

Workers scramble for day jobs in Hebei

Farmers wait for their potential employers at a roadside labor market in Shijiazhuang, Hebei province.

Wang Shuji is typical of the workers who gather each morning at local labor markets, the self-forming roadside gathering places for those seeking day jobs in Hebei province.

Wang, 43, is a farmer who seek short-term employment in towns or cities near his home. Capable of doing most kinds of odd jobs, he mainly works at construction sites, building walls or carrying materials.

Most mornings, he gets up at 6 o’clock, eats some instant noodles and rides his electric bike the 20-plus kilometers from his home in Dazhaicun village to Shijiazhuang, Hebei’s capital.

“I usually rush there, not to punch in like company employees, but to be picked up by employers as soon as possible,” he said.

After he gets to the market, he must wait for employers to arrive, then rush toward them.

“When an employer came, there would be a stampede toward him or her, just like fans toward singing stars,” Wang said. “But we were not chasing after stars, we were scrambling for jobs the employer was going to provide.”

He speaks loudly, trying to be heard over the other job hunters.

“What kind of workers do you need? How many workers do you want? How much would you pay me for a day? I can do it. Take me. OK, where is the workplace? How should I go? I have an electric bikes, so I can go by myself,” Wang said, recalling the exchanges.

After the questioning, employers usually decide within five minutes whether someone was suitable for the job.

“There are scores of peasant workers there, so the chance of being chosen would be very low if you are not quick enough,” Wang said. “If I came early, I would have more chance to compete for jobs and start a day’s work early, which would lead to more money.”

Yang Kang, manager of a local construction company, said it’s convenient to find temporary employees from roadside labor markets and the pay is relatively low.

“There would be commissions to pay if I find workers through brokerage firms,” Yang said.

Last Friday, Wang waited until 10:30 am, but still didn’t get a job.

“It was common. I usually wait a whole morning or even a day, but get nothing,” Wang said. “The numbers of employers coming here will increase to normal after the Lantern Festival.”

When asked why he didn’t find a steady job that could give him regular salary and spare him the daily competition for jobs, Wang said he didn’t have much choice with only a junior high school education background.

“It’s not that I don’t want a steady and cushy job,” Wang said. “I am very suitable for a stable job like a security guard at shopping malls or factories.”

But he always refused such offers because the jobs are not well paid at just 1,500 yuan ($230) or so for a month.

“I can earn about 3,000 yuan a month on average by finding jobs from the market, though I’m more tired,” Wang said.

Wang said he dislikes formal labor markets as they are far away and not as convenient as the roadside ones. “Besides, it’s complicated for us to register or complete applications,” he said.

Multinationals eye China market as consumption pattern shifts

On its launch day in China, Apple Pay saw over 30 million Chinese bank cards linked to the payment service, an achievement that impressed Apple Pay vice president Jennifer Bailey.

“We think China could be our largest Apple Pay market,” Bailey told media last Thursday.

To lure more customers, some of Apple Pay’s partner banks worked with Starbucks to offer discounts to customers who pay with Apple Pay.

With wages up and people accumulating wealth, the rising middle class is driving a major shift in China’s consumption pattern, making the country a huge market that multinationals can ill afford to ignore.

Increasingly, Chinese are able to afford more than just the bare necessities. Instead, they spend on things they like but don’t need, those “discretionary items.”

According to data from consulting firm McKinsey & Co., discretionary spending is forecast to grow over 7 percent annually between 2010 to 2020, while seminecessities, including health care and apparel, will expand around 6 to 7 percent, all surpassing the growth rate of actual necessities.

The shift is already seen in satisfying results reported by companies selling high-end products, such as Apple.

While an iPhone costs almost five times the average price of a domestic smart phone, Apple has a substantial consumer base in China that not only pays for the phone itself but for the brand.

“There’s an enormous number of people moving into the middle class and I think this provides us with great opportunities to win over some of these customers into the Apple ecosystem,” said Tim Cook, Apple’s chief executive during an earnings call.

“We remain very bullish on China, and don’t subscribe to the doom and gloom kind of predictions frankly.” Cook said.

The Chinese middle class for the first time outnumbered those in the United States in 2015, hitting 109 million at the American standard after purchasing power is adjusted, according to a report by Credit Suiss.

And the number continues to climb. In 2015, China’s national per capita disposable income rose 7.4 percent from 2014 in real terms, outpacing GDP growth.

Seeing the opportunities of an increasingly well-off society, foreign firms are tapping into China’s entertainment industry to monetize on the growing interest in the high-end recreational market.

American film studio 20th Century Fox, for example, told China Daily recently that it had chosen Beijing to be the destination of the world’s first ever Simpsons store.

To be opened in March, the store will offer merchandises related to the American animated sitcom, which has proven to be very popular in China.

The decision followed a similar move by Walt Disney Co., which opened the world’s largest Disney store in Shanghai in May 2015 to huge queues of customers.

The domestic entertainment industry is also taking off thanks to this shift. During the Spring Festival holiday, box office sales surged 67 percent year on year to 3 billion yuan.

Spending on recreational activities including travel, dining, sports, and gaming in China still lags behind the developed world, and “fun” has the biggest potential for growth, said a Goldman Sachs report on consumer research.

“There’s a perception that China’s consumption story has already played out,” said Joshua Lu, co-business unit leader of asia consumer research at Goldman Sachs. “In the coming decade, in a way the story is even more exciting as hundreds of millions will see their income doubling and enter the middle class. That migration will continue to be a powerful driver of the China consumption growth story.”

In 2015, consumption contributed 66.4 percent to China’s gross domestic product, up 15.4 percentage points from 2014.

As China transitions into a more consumption-driven economy, global companies should make smarter, higher-quality products to adapt, too. After all, consumers are what really matter for most of them.

Fosun’s deal for Phoenix ditched

Shanghai-based Fosun has dropped a plan to buy a controlling stake in Israeli insurer Phoenix Holdings because certain conditions for the deal were not met, a statement said yesterday.

Fosun had agreed to buy 52.31 percent in Phoenix from Delek Group in June last year in a deal worth $462 million.

The Chinese company yesterday said the two parties decided to terminate the deal as “certain conditions” have not been “fulfilled or waived,” Fosun International said in a statement filed to the Hong Kong stock exchange.

Neither party is obliged to pay a penalty, the statement added.

Shares of Hong Kong-listed Fosun International lost 1.14 percent yesterday, lagging the 1.03 percent fall in the Hang Seng Index.

In a separate statement yesterday, Delek said it is evaluating other options for the sale of its holding in Phoenix to potential investors.

The termination is the first major setback for Fosun after its chairman, Guo Guangchang, was briefly taken by authorities in December last year to assist an investigation as part of the Chinese government’s anti-corruption campaign.

The Tel Aviv Stock Exchange suspended trading in Phoenix and its parent company Delek after Guo went missing.

Israeli newspaper Globes said last month the country’s Supervisor of Insurance, Capital Market and Savings, Dorit Salinger, was not likely to approve Fosun Group as the controlling shareholder in Phoenix.

Fosun now has over one-third of its total assets invested in insurance, including Yong’an P&C Insurance, Pramerica Fosun Life Insurance, Hong Kong-based Peak Reinsurance, Portugal’s Fidelidade Group, US-based Meadowbrook Insurance Group and Ironshore.

Chinese buyers buoy Shiseido sales

A man checks out a Shiseido Co Ltd’s beauty products advertisement in Beijing. The Japanese company’s China business grew by only 2 percent last year.

One of Japan’s leading personal care companies has reported strong demand for its products from Chinese visitors to the country, despite weaker growth in the Chinese market itself.

The latest figures from Shiseido Co Ltd revealed its 2015 annual sales rose 12.6 percent to 763.1 billion yen ($6.7 billion). Analysts said that the increase was helped significantly by Chinese tourist sales.

The group’s operating income rose 77.4 percent to 37.7 billion yen, but its China business grew by just 2 percent.

“We have seen a substantial increase, both in sales and income, mainly due to our major brands in the domestic market,” said Norio Tadakawa, its corporate officer and CFO, who added both its operations in Beijing and Shanghai struggled last year.

Sales at its Shanghai outlet have been flat for several years, he said, adding the firm is now planning to reverse that with a targeted 10 percent growth this year in China.

In the medium to longer term, he said, “we are seeing more of the middle-class market, so we will keep on expanding consumption and diversification” of products, adding its e-commerce business is expected to grow 20 percent in China.

Tadakawa said Shiseido is also planning a new innovation center in China, which will help the firm grow market share.

He admitted, however, that competition from South Korean brands is intensifying, making its job in China harder.

According to Kantar Worldpanel China, sales of South Korean cosmetic brands are now growing faster than Japanese brands, at 33 percent compared with 11.6 percent, focused mainly on high-end products.

Shiseido’s results followed closely on the heels of those from Japanese beauty care rival Kao Corp, which announced net sales increased 5 percent compared with the previous year to 1.47 trillion yen for the year ended Dec 31.

Its profits increased, said officials, due to the effect of increased sales of healthcare products in markets across Asia.

Net income increased 19.3 billion yen compared with the previous fiscal year to 98.9 billion yen, with beauty sales increasing 3 percent, while cosmetics sales decreased 2.3 percent.

Laurie Du, an analyst at Mintel Group Ltd, the United Kingdom-based research firm, said Chinese consumers have gained more awareness of international brands through frequent overseas travel, especially for Japanese goods bought in Japan.

Du said products made in Japan now represented 29 percent of all skincare product sales by Chinese travelers, which is higher than goods from both South Korea and France.

“Chinese consumers strongly believe in the competitiveness, quality and price of Japanese products,” she said.

Jason Yu, general manager of Kantar Worldpanel China, said it had also seen a significant rise in demand for everyday Japanese fast-moving-consumer products by Chinese buyers in Japan.

But he added that it remains critical for Japanese marketers to expand their product offerings to avoid missing out on what are likely to be growing numbers of Chinese traveling overseas for goods.

Dining, shopping and traveling lead in Spring Festival spending

Customers do shopping for the Spring Festival at a supermarket.

(ECNS) — China UnionPay transactions soared to a record high in the week-long Lunar New Year holiday, with dining, shopping and travelling being the dominant elements, the operator revealed.

The total volume of transactions at home and abroad through China UnionPay cards amounted to 312.1 billion yuan ($47.6 billion), up 31 percent year on year. The total number of transactions reached 307 million, an increase of 15 percent, during the holiday from Feb. 7 to Feb. 13.

Card payments in supermarkets, on large household appliances and general merchandise continued to show robust growth, up 41 percent, 22 percent and 13 percent respectively.

Card spending in restaurants grew by 6 percent while the average spending was 585 yuan during this time. Guangdong, Shanghai, Beijing and Jiangsu led the country in terms of catering expenses, according to the report.

Data analyst Chen Han of China UnionPay said people usually prefer high-end restaurants and spend more during the most important festival in China.

Travelling was also popular in the seven-day holiday, with the volume of ticket purchase transactions in aviation, railway and highway passenger transportation increasing by 39 percent, 39 percent and 98 percent respectively.

One notable change is increased spending at gas stations by cardholders, at a growth rate of 39 percent, while it shows more people chose traveling by driving cars themselves, according to Chen.

An analysis of overseas card use found that more Chinese tourists spend the holiday in countries along the “Silk Road Economic Belt and the 21st-Century Maritime Silk Road,” inlcuding Kazakhstan, Malaysia, Vietnam and Cambodia.

Spending witnessed a peak in the run-up to Spring Festival while the daily volume of transactions hit a record of 29.5 billion yuan on Feb 1.

China UnionPay is solely responsible for bank card transactions on the Chinese mainland and has extended its network to 150 countries and regions.

China’s major coal-production region slashes overcapacity

Guizhou, one of the country’s major coal-producing provinces, shut down 183 mines in 2015 in a bid to cut obsolete capacity, according to local authorities.

Through closures, mergers and acquisitions, Guizhou has reduced its number of collieries in operation and under construction to less than 800 from about 1,700 since 2013, said a spokesman with the provincial energy administration.

It aims to close more than 80 others this year, said the spokesman.

Guizhou is the largest coal producer in southern China, with the country’s fifth largest proven reserves. The province’s move is part of a national campaign to cut overcapacity amid dwindling demand in the coal industry.

Earlier this month, the State Council issued a guideline saying no new coal mines would be approved in the following three years and the country will shut down 500 million tonnes of capacity and consolidate another 500 million tonnes into the hands of fewer but more efficient mine operators in the next three to five years.

Another coal-producing giant, north China’s Shanxi Province, has decided to keep production under 1 billion tonnes per annum for the next five years. Its production in 2015 amounted to 944 million tonnes.

Shanxi has produced about one fourth of China’s coal since 1949. However, the industry had suffered losses for 18 consecutive months by the end of 2015, beginning in July 2014.

Spring Festival tourism revenue rises in Beijing

Tourists visit the Palace Museum, also known as the Forbidden City, during the Spring Festival holidays in Beijing, capital of China, Feb. 10, 2016.

Tourism revenue in Beijing rose 2.9 percent year on year during the week-long Spring Festival holiday, according to the municipal tourism commission.

Tourism revenue reached 4.92 billion yuan (753 million U.S. dollars) during the holiday, which began on Feb. 7, according to a statement released by the commission on Saturday.

The Spring Festival, or Chinese Lunar New Year, fell on Feb. 8 this year. It is the most important holiday in China for family reunions.

The number of tourists during the Spring Festival holiday topped 9.19 million in the city, up 1.9 percent from the same period last year, the statement said.

Historical sites, including the Forbidden City and the Great Wall as well as ski resorts and traditional temple fairs attracted most of the visitors, it said.