Archives October 2017

Why is 6 pct growth achievable for China’s economy?

China is determined to put growth quality before pace, but that will not hold the economy back from growing faster than most of other countries in the coming decade, according to experts.

In a report delivered to the 19th National Congress of the Communist Party of China (CPC), the country’s leadership called it “a new historic juncture in China’s development,” as the economy has been transitioning from a phase of rapid growth to a stage of high-quality development.

In the eyes of Chi Fulin, head of the China Institute for Reform and Development, that does not mean the growth rate will be mediocre.

Over the next five to 10 years, China’s economy will be able to achieve at least 6 percent of annual growth thanks to improvement in industrial structure, upgrading of consumer spending and progress of urbanization, he said.

In the past five years, the global economy expanded at an average rate of 2.6 percent, while developing economies grew at 4 percent.

China has set 2020 as the target to finish building a moderately prosperous society in all respects, just one year before the CPC celebrates its 100th anniversary.

Chi estimated that by the end of 2020, China’s economic rebalancing will yield eye-propping results.

By then, the value of the country’s service sector will increase to about 50 trillion yuan (7.58 trillion U.S. dollars) from 38.4 trillion yuan recorded in 2016. Retail sales of consumer goods will also expand to about 50 trillion yuan from 33 trillion yuan recorded in 2016.

The integrated development of urban and rural areas is expected to generate investment and consumption of nearly 100 trillion yuan, which will be the most remarkable bonus for China’s development in the medium to long run, he said.

Over this period, China’s contribution to global economic growth would remain at around 30 percent. More than half of its population would become middle-income earners.

“A successful rebalancing of the world’s second largest economy would not only upgrade China’s economy, but also boost global economic recovery and growth,” Chi said.

In the future, China’s economic restructuring will be advanced together with opening up, of which the Belt and Road Initiative and the development of service trade and free trade zones will be the focuses, he said.

The IMF recently raised its forecast for China’s economic growth in 2017 and 2018 to 6.8 percent and 6.5 percent respectively, both higher than the earlier forecast in July.

For an economy with a total volume of over 11 trillion U.S. dollars, maintaining such high growth is not easy, Chinese Vice Finance Minister Zhu Guangyao said.

China’s stable economic growth mainly stems from major progress in economic reforms, particularly supply-side structural measures, and the government’s ability to maintain a stable macroeconomic policy, he said.

While gains from structural reforms will come with a time lag, they will have a positive impact on China’s economic growth in the medium term, said Changyong Rhee, director of the Asia Pacific Department at the IMF, adding China’s growth has also provided ample opportunities for Asia to maintain its growth over the last ten years.

Chinese entrepreneurs’ views on wealth changing: study

Chinese entrepreneurs’ views on wealth are changing significantly as their fortunes increase, China National Radio reported on Monday, citing a new study.

Some 568 billionaires from greater China made the Hurun Global Rich List released early this year, the highest number from any country in the world and 33 more than the United States with 535. Among them, 470 were from the Chinese mainland, and 100 from Beijing.

A separate survey by the All China Federation of Industry and Commerce showed the total assets of the top 500 Chinese private enterprises increased to 17.3 trillion yuan ($2.6 trillion) in 2015 from 434.6 billion yuan in 2001, an average annual growth of 30 percent. The average asset value of these enterprises increased to 34.6 billion yuan in 2015, from 860 million yuan in 2001.

The latest study, jointly conducted by the Dacheng Enterprise Research Institute and the Social Sciences Academic Press (China) in Beijing, found private entrepreneurs now focus more on the relationship between the interests of the nation, their own and those of their enterprises, attaching greater importance to sustainable growth, competitive edge and contributions to society.

In the past 40 years since China began its reform and opening up, the number of private enterprises has been rising rapidly, bringing increasing fortunes to entrepreneurs.

The study attributed the rapid growth of Chinese private entrepreneurs’ fortunes to their utilizing various opportunities with regard to policy, market, resources and business environment. Their actions, on the whole, conformed to laws, regulations and policies of the country, it added.

“Entrepreneurs’ money is not their money,” said Jack Ma, the founder of e-commerce giant Alibaba Group. “Some people said I was the richest person in China, but I think the ‘fu ‘ in ‘shouru’ (the richest) actually means the ‘fu’ in ‘fuze’ (to take responsibility).” His company’s charity activities now cover four fields, including eco-environmental protection as well as health and medical care.

Chen Yongjie, vice president of Dacheng Enterprise Research Institute, said the change in entrepreneurs’ views on wealth, together with their charity campaigns, represent an important characteristic of China’s economic, social and cultural development for the present and future.

“Chinese entrepreneurs’ charitable activities have gradually grown into a trend, which is having and will continue to have a great impact on narrowing the wealth gap and adjusting China’s income distribution and social conflicts,” said Chen.

The study suggested China improve laws and regulations to allow entrepreneurs to reasonably, intelligently and effectively use and manage their fortunes.

Tesla eyes Chinese campuses as it continues hunt for top talent

The Tesla logo is pictured on Feb 5, 2014 in its first Chinese mainland show room in Beijing.

Tesla Inc is conducting a nationwide campus recruitment drive in China as part of its efforts to get better established in the world’s largest new energy car market.

The United States-based electric carmaker has been conducting job fairs at four universities in Beijing, Shanghai, Guangzhou and Chengdu to recruit forthcoming graduates to work in about a dozen tier-1 and-2 cities in the country.

“We conducted campus recruitment just as we did last year, with a focus on finding potential recruits for sales, service, IT and intern positions. We have not determined how many people will be hired yet,” said Tesla in a statement. The Tesla job fairs run until this Friday.

There are eight posts available for new graduates, according to Tesla’s page on popular recruitment website 51job. In total, Tesla is hiring people for 79 posts for its business in China.

It has 32 experience centers and eight service stores in the country but did not disclose the number of current employees.

This campus recruitment drive is unlikely to have any direct connection with Tesla’s localization efforts, as most jobs available are sales and service-related instead of engineering and production.

Tesla had confirmed earlier that it was in talks with the Shanghai city government to establish a manufacturing facility.

The company has been growing steadily in China, with its revenue more than tripling from 2015 to 2016. It delivered 13,500 cars in the first nine months of 2017, more than double from a year earlier, according to statistics from the China Passenger Car Association.

The company is now looking to build on its current success in China, home to about 1 million new energy cars by the end of 2016.

On Monday, the carmaker unveiled in Shanghai its largest charging station in the world, which can accommodate 50 Tesla cars at the same time.

To date, Tesla has 700 charging posts in 170 cities in the country, with the number expected to rise to 1,000 by the end of the year.

Earlier this month, Tesla announced that it has modified the charging hardware for Tesla vehicles built for the Chinese market so that they can make use of the public charging infrastructure.

Shandong tightens investment regulations on vehicle production, overcapacity industries

East China’s Shandong Province said Wednesday it has tightened its investment regulations, including a move to not approve new gasoline-powered car producers.

Meanwhile, new-energy vehicle manufacturers are now required to have power system and whole-vehicle research and development capacities before receiving government approval for establishment, the provincial government said.

China has been offering subsidies for new-energy vehicle purchases in a bid to increase the numbers of cleaner vehicles on the road.

It has signalled the intention to join countries such as Britain and France with plans to ban the manufacturing and sales of fossil fuel cars.

Xin Guobin, China’s vice minister of Industry and Information Technology, said in September that China has begun researching a timetable to phase out the production and sales of fossil fuel cars.

The provincial government also announced that it would no longer approve new plants in industries plagued by overcapacity, such as steel, electrolytic aluminum, plate glass and shipbuilding.

In addition, it will not approve capacity increases for coal production companies, and new dangerous chemicals projects will now require investment of more than 300 million yuan (45.2 million U.S. dollars) to receive approval.

Cross-border e-commerce platforms are the stars of China’s ever-rising foreign trade

? Chinese government encouraging the development of cross-border e-commerce along Belt and Road

? Such platforms are developing rapidly in China and enjoying the benefits of new policies, including tax breaks and duty-free warehouses

? Customers appreciate the convenience and affordability of buying authentic foreign products online

Whenever Liu Lin finds herself missing England, where she has previously studied, she just hops onto a cross-border e-commerce platform to buy herself some British-made merchandise.

“Some of the products I used to purchase there, such as a brand of combs made in England, aren’t sold in China, so I buy them from overseas,” she said.

Shopping for foreign products has never been easier for Liu and other Chinese like her. But imported makeup, food and clothes from other countries can now all be obtained with one swipe of the phone.

China’s cross-border e-commerce platforms have developed rapidly in just the past few years. Many online shops both in and outside of China, especially those from Belt and Road countries, are taking advantage of this phenomenon, with both the foreign retailer and the Chinese shopper benefiting.

Cross-border e-commerce is now a bright, shining highlight of China’s ever-growing foreign trade. According to data from the China Electronic Commerce Association, in the first half of 2017, China’s cross-border e-commerce trade reached 3.6 trillion yuan ($541.87 billion), up 30.7 percent from last year.

China has also released a series of new policies to further develop cross-border e-commerce, such as increasing the efficiency of products going through customs and supporting enterprises that establish overseas sales channels.

Selling by the millions

In September, Chinese premier Li Keqiang said at an executive meeting of the State Council that there needs to be more development of cross-border e-commerce on a bigger scale, including encouraging enterprises to develop through Belt and Road.

Data shows that the trade volume of countries along the Belt and Road accounts for a quarter of China’s entire foreign trade. In this case, cross-border e-commerce can be a large boost for trade.

Shops both in and outside of China are benefiting from being placed on such platforms. At a recent cross-border e-commerce convention, the director of Jilin’s Guhetai Machinery told Economic Information Daily that 80 percent of his company’s clients were found via the platform.

In the 18 months since Guhetai Machinery first started using e-commerce platforms, the security safes it produces have been sold to numerous Belt and Road countries. According to a new research report from Chinese e-commerce giant Jingdong (JD), many Chinese companies have successfully extended their brands overseas.

Electronics brand Puppyoo, for instance, became the highest-selling small electronics seller after joining JD’s cross-border e-commerce platform. Local wig maker Allrun has also successfully established clients in 92 countries. Earphone brand Bluedio and male clothing designer Freesoldier have likewise successfully exported through the platform.

Foreign companies are also placing themselves on Chinese e-commerce platforms in order to make direct contact with Chinese customers. By the first half of 2017, Internet giant NetEase’s platform Netease Koala successfully established cooperation with 279 foreign brands along Belt and Road, with a sales volume of nearly 200 million yuan, according to Wang Zheng, senior press relations manager for Koala.

Famous foreign companies, such as Korean cosmetics titan L&P, Panasonic and Herobaby milk formula from Europe, have also signed contracts with Koala. The platform promoted Thailand’s latex pillows and successfully doubled its sales in China in 2016. Koala was awarded by the Thai embassy in China for its success, Wang said.

The JD report also pointed out that many smaller countries prefer to focus on selling their specialties to China via these new platforms. A few examples are cotton products from Egypt, black tea from Sri Lanka, jade from Myanmar and rose essence oil from Bulgaria.

In 2016, companies from Belt and Road countries were on top of the list for increasing sales to China. Countries such as Bangladesh and Lithuania realized a 60 percent increase in sales compared to the year before.

Among the products being sold, food from the Belt and Road countries is the most popular. Fruits and vegetables are also rising stars in China’s cross-border e-commerce. In 2016, Mexican avocados, Chilean cherries and Filipino dried mango were selling by the millions to Chinese online shoppers.

Authentic products

For Chinese consumers in years and decades past, the only way to buy foreign products without leaving the country was purchasing through an agent. But this way of shopping was very slow, sometimes taking months, and there was no way to ensure authenticity. Furthermore, agents charged considerable markups for their products, Liu said, sending the entire sector into chaos.

A local shopper surnamed Cheng told the Global Times that, for the past several years, she has been using Chinese e-commerce platforms to purchase products from Europe, U.S. and Australia. Specifically, she uses Xiaohongshu and Koala to buy cosmetics and handbags from those countries.

She said she appreciates the discounted prices, which are far cheaper than the same products being sold at brick-and-mortar foreign stores in China, as well as its convenience. “I can place an order without going out the door,” she said.

Liu agrees that e-commerce platforms have made shopping in China much more convenient. In the past, when she wanted something from abroad, she’d either have to wait for a friend to visit that country or wait weeks and even months for old-school Western e-retailers like Amazon to ship them. Today, anything can be had in a matter of days.

“Sometimes, when I watch TV shows and see stars wearing foreign-brand clothes, I just hop on a platform like Koala and buy the same outfit,” she said, adding that due to Taobao’s reputation for selling counterfeits, fakes and knockoffs, she’d prefer to pay a bit more for the peace of mind that a trusted seller provides.

Government policies support cross-border e-commerce by cutting down on costs and increasing efficiency, Wang said. The government offers a 30 percent tax discount for cross-border e-commerce platforms, which allows local consumers to enjoy authentic, high-quality products at affordable prices.

The government is also now allowing cross-border duty-free warehouses. Zhang Chao, deputy director of startup Xbniao.com, told media his company has benefited from these new governmental policies. An important feature of Xbniao, according to Zhang, is that it has overseas warehouses and operation centers, which allows them to ship products to 45 countries and regions around the world.

As the government supports Belt and Road construction, it also supports cross-border e-commerce companies establishing overseas warehouses along Belt and Road logistics hubs; platforms that already have warehouses, such as Xbniao, have a competitive edge.

There are problems that still need to be tackled. According to media reports, language is still a big barrier preventing Chinese companies from increasing their business in foreign countries through e-commerce. Media has reported on companies recruiting talents who speak the languages of smaller countries.

“It is shown that the government supports and encourages the development of cross-border e-commerce business and also regulates it,” Wang said. “As policies improve and develop, the market is sure to welcome new development. Right now, the industry has become an important force in increasing domestic consumption and has obvious boosts on the domestic economy.”

Belt & Road Best Sellers

Best-selling “Made-in-China” products along the B&R:

Cellphones, computers, Internet products, electronic components, furniture and textiles

Made-in-China products with the highest overseas sales growth:

Cars, food, sports products

B&R countries with the highest sales growth in China:

Lithuania, Montenegro, Bangladesh, Oman, Tajikistan

Best-selling products from B&R countries:

Food, wine, textiles, fruits, clocks and watches, sea food

Shanghai submits preliminary plan for free trade port to central gov’t

Shanghai has submitted to the central government the first draft of plan to establish a free trade port in the city, the Shanghai Securities News reported on Saturday.

The plan falls under the China (Shanghai) Pilot Free Trade Zone (FTZ) Scheme announced by the State Council, China’s cabinet, in March 2017, and it incorporates the Yangshan and Pudong airport zones.

The free trade port will adopt information technology to strengthen its supervision systems, which will reduce risks and simplify goods entry management measures, the report said.

The port will establish and improve a system for risk prevention and control purposes while staying in line with international practices of financing, foreign exchange, investment and visa controls.

”The biggest breakthrough is (a series of) preferential measures for import and export tariffs so as to meet China’s upgraded consumption demand and improve export competitiveness,” one source told the Shanghai News Securities.

“For instance, industry sectors at the port, such as cosmetics and food, will be moved from a single model of imports and exports of finished products into a full supply chain covering raw materials, procurement, production and sales,” the source said.

“The move will facilitate the improvement of domestic brands’ competitiveness when ‘going global.’ At the same time, domestic enterprises will drive further transformation and upgrading, reduce costs and offer better services for consumers,” the source said.

“Shanghai’s free trade port is part of our national strategy. It also exemplifies innovation and breakthroughs in free trade zones,” Sun Yuanxin, deputy director of the Research Institute for the Shanghai FTZ at the Shanghai University of Finance and Economics, was quoted as saying in the report.

“The free trade port is also an important test of the waters for the city as the municipal government deepens its reforms.”

Economy defies doomsayers

China’s economic growth looks set to accelerate this year, the first time in seven years, after it registered a 6.8 percent year-on-year GDP growth in the third quarter. Given that growth trend has been achieved against the backdrop of both domestic structural reforms and the still fragile global economic recovery, it showcases the exceptional resilience of the world’s second-largest economy. [Special coverage]

China’s GDP growth in the first three quarters has been in stark contrast to the scenario depicted by many doomsayers late last year. Even more reassuring, while a variety of economic indicators are showing signs of steady growth, the country has also made much headway in carrying out the tough task of economic restructuring.

Industrial output growth, for example, increased to 6.7 percent in the first three quarters from 6 percent a year ago, with high-tech manufacturing and equipment-making industries, which are the backbone of a country’s industrial development, showing brisk performance. The growth in their output was 13.4 percent and 11.6 percent, respectively, 6.7 percentage points and 4.9 percentage points higher than that of overall industrial output.

Another case in point is retail sales growth, which remained strong at 10.4 percent in the January-September period. Although that was unchanged compared with a year ago, online sales increased by 34.2 percent, 8.1 percentage points higher than a year ago, indicating the bigger role played by this new driving force for consumption.

In terms of the supply-side structural reform, China has continued to reduce its leverage levels and the country’s investment in environmental protection, public facility management and agriculture all registered much higher growth than overall investment expansion.

Such encouraging fundamentals have been achieved thanks to the government striving for innovative, coordinated, green, open and shared development.

As Xi Jinping, general secretary of the CPC Central Committee, said on Wednesday, while expansion of economic scale remains important, top priority must be given to the quality of growth.

It is a focus that will ensure sustainable long-term growth.

Mid-size firms bullish over next 3 years

Medium-sized companies on the Chinese mainland are confident of the business growth over the next three years and are focusing on expanding in the domestic market, according to a HSBC report.

Generally, medium-sized companies surveyed saw both their revenue and profit margin to grow steadily in the next three years, the report said.

“As an important part of the national economy, mid-market companies have their own features in business development and market strategies.” said Fang Xiao, vice president and director of commercial finance of HSBC China.

“Different from mega-sized companies which are actively expanding in global markets, we found that many mid-sized companies focus more on seizing the opportunities arising from China’s economic upgrading and transformation and digging deep to tap the potential of local markets.”

One-third of the mid-sized companies on the mainland highlighted tapping market potential as the main channel to increase revenue. This option topped expanding the domestic market which came in second at 24 percent while improving operational efficiency ranked third at 19 percent, according to the report.

Meanwhile, 61 percent of medium-sized enterprises on the mainland believe that investing in technology can bring new business opportunities and 54 percent see green development as the way to survive.

More firms set to beef up travel budgets

Along with rising business confidence, as many as 31 percent of Chinese companies expect to increase their travel budgets over the next 12 months, surging from the 17 percent of respondents that predicted budget increases last year, a survey showed.

The 2017 China Business Travel Survey was published by the CITS (China International Travel Service) American Express Global Business Travel on Tuesday. It revealed that 40 percent of the polled organizations planned to expand their budgets to tap into the opportunities presented by the Belt and Road Initiative.

China became the country with the largest business travel expenditure of $317 billion in the world after overtaking the United States in 2016.

The survey indicated that 75 percent of China’s business travel spending was made domestically, but Tan Haoling, vice-president of CITS American Express Global Business Travel, said they have also noticed the trend that many Chinese companies are looking outward for opportunities in global commerce.

“China’s Belt and Road Initiative could benefit Chinese organizations with an international travel program (43 percent of companies), as well as those with a regional program (21 percent of companies),” said Tan.

The survey also highlighted the importance of business travel as a key driver of revenue for many Chinese organizations, with 90 percent reporting that increased client-facing travel would likely increase revenue, and 53 percent of the respondents believed an increase in client-related travel would improve overall revenue by between 10 percent and 20 percent.

“The research tells us Chinese companies believe there are savings to be identified within their current travel budgets, and that many intend to put measures in place to realize some of these savings next year,” said Tan, who added inflexible travel policies (30 percent) and complex reimbursement processes (23 percent) are the top two complaints for business travelers.

The barometer is an annual report detailing the status of, as well as forecasts for, China business travel. This year’s report surveyed executives from 150 companies in China, in a variety of enterprises in major Chinese cities.

CITS American Express Business Travel is a joint venture between American Express and CITS.

A white paper on China’s business travel by Ctrip, China’s largest online travel platform, published earlier this year, projected China’s market will continue to see double-digit growth this year.

Shanghai to help foreign-invested R&D centers

Shanghai will offer financial incentives and greater access to government-led projects for foreign-invested research and development centers as it bids to turn itself into technology and innovation center.

Foreign investors are encouraged to set up R&D centers and incorporate existing ones into their global R&D center as the government will offer a one-off 5 million yuan ($759,000) for foreign-invested R&D centers employing more than 100 employees, according to new rules released yesterday.

The R&D centers will also receive subsidies to cover as much as 30 percent of the rent for three years. Rent subsidies will also be granted for R&D centers if they share their resources with small businesses and entrepreneurs.

The government has also vowed to lift the proportion of foreign-invested R&D centers within state and city-level technical centers, and offer as much as 3 million yuan per project for city-level technical centers engaged in lifting basic innovative capability, breakthrough of core technology, and smart manufacturing.

“Promoting the role of foreign investment to build up Shanghai’s technology and innovation center is a new path of innovation-driven development,” said Shang Yuying, director of the Shanghai Commission of Commerce.

The incentives include funding for R&D projects in emerging industries, equal policy support between domestic and foreign investment on transfer of technology, faster import procedures for R&D materials, and financial awards for new patents.

Various government bodies will also enhance protection of intellectual property rights, simplify visa and work permit procedures, and offer more public services for foreign investment R&D centers.

There were 416 foreign-invested R&D centers in Shanghai by the end of August, accounting for a quarter of the total on China’s mainland, according to official data.