Archives 2017

Unilever prepares sale of food brands: newspapers

Unilever is preparing a 6 billion pound ($7.44 billion) sale of some of its food brands, British newspapers reported on Saturday.

The Anglo-Dutch company is planning to sell Flora margarine and Stork butter brands, the Sunday Times said.

The Sunday Telegraph, which also cited a figure of 6 billion pounds, quoted sources as saying private equity firms Bain Capital, CVC and Clayton Dubilier and Rice have started working on offers for these businesses. Unilever did not immediately respond to a Reuters request for comment.

The maker of Knorr soups, Dove soap and Ben & Jerry’s ice cream rebuffed a surprise $143 billion takeover offer from Kraft Heinz last month, stating that the group “sees no merit, either financial or strategic, for Unilever’s shareholders.”

The company has launched a business review to consider returning cash to shareholders, making medium-sized acquisitions and more aggressive cost cuts, the Financial Times reported on Wednesday. In a report released in January, Unilever stated that its food business sector sustained its return to growth, driven by the packs with easy-out technology and organic variants.

Shared bikes revitalize cycle industry

Ofo bikes around Chaoyang Park in Beijing.

Until fairly recently, bicycle production had been considered a sunset industry, but a nationwide resurgence caused by the popularity of shared bikes has given it a second lease of life.

Li Dewu, the manager of a bike production company based in Shenzhen says he never expected such a spike in demand.

Last year the downturn in demand had Li worried about his business, but an order for thousands of shared bikes just before the Chinese New Year turned things around. Li described the major deal as a second madness in his twenty year career that made him both excited and yet also a little nervous.

Hu Zefeng, who runs a cycle production company in Shenzhen, also had a busy few months with deals for over 1.5 million bikes received in total. “We have employed about 500 new workers and added 7 more assembly lines from Shenzhen to Tianjin.” Hu said.

The demand for bike parts and accessories has also seen a boost. Du Kaishan, manager of a bike saddle provider said: “my factory is over loaded now, with hundreds of thousands saddles having to be made in a single deal every month.”

The ubiquitous shared bikes are causing a stir in China. Companies such as Ofo and Mobike have over 10 million registered users and distribute cycles to every corner of cities including Beijing and Shanghai.

According to statistics from the China Cycle Association, over 2 million shared bikes have been placed in more than 30 cities in China since 2016.

Pricier cycles

The expansion in the shared bike market has, however, been accompanied by a rise in the price of cycles. Producers have raised their prices by 5 percent on average, according to The Paper.

A manager at a cycle assembly factory in Suzhou said the high demand for shared bikes had resulted in a shortage of cycle supplies, which influences the cost of the end product.

An industry insider said another element triggering pricier bikes is the rising price of steel and rubber, the raw materials used to make cycle frames and tires. Some types of steel have seen a 35 percent increase in prices over the last year, rubber nearly 70 percent.

Most of the cycle producers though said that they would continue with the original price of each bike or perhaps raise it a little for regular clients. Ofo, Mobike and new business entrant Bluegogo have all denied that the cost of their cycles has gone up.

China enhances crackdown on capital market fraud

World Consumer Rights Day has arrived, and China plans to enhance its crackdown on capital market fraud.

The country’s top securities regulator, the China Securities Regulatory Commission (CSRC), announced last Friday that it would impose the maximum penalty on office service provider China Nine Top and AnShan Heavy Duty Mining Machinery for severe violations of information disclosure rules.

China Nine Top is reported to have inflated its revenue and bank deposits while covering up an assets gap in order to restructure with the listed company AnShan Heavy Duty Mining Machinery.

Besides exposing companies faking assets to get listed, securities watchdogs have punished other capital market counterfeit practices such as inflating financial performance to avoid delisting, and fraudulent initial public offerings using fake documents.

In order to stay on the stock market, a property developer close to being delisted due to poor financial performance turned a profit from a loss in 2016 by selling part of its equity at an over-valued price in the fourth quarter, according to the Shenzhen Stock Exchange.

There will be enhanced supervision over year-end asset selling, and restructuring to crack down upon profit manipulation, according to the stock exchange.

In February, the CSRC announced 20 representative illegal stock market cases of 2016, including the high-profile case of Dandong Xintai Electric, the first company to be forced to delist from the Chinese stock market due to IPO disclosure cheating.

“We will continue to expose some influential fraud cases in areas like restructuring and acquisition,” said Liu Shiyu, head of the CSRC, late February. “For wrongdoings on the capital markets, we will follow and treat them in a timely and tough manner.”

The CSRC imposed 139 administrative punishment decisions last year, 13 as cases of financial fraud.

“Listed companies are profit-seeking, and it seems that they can get more than what they might have to pay for, by cheating, so they make reckless moves to try their luck,” said Tian Lihui, a financial professor with Nankai University. “So there should be harsher punishment, and most importantly, improvement of the legal framework of the capital market, such as stricter requirements for information disclosure.”

Meanwhile, regulators are also working on improving the delisting mechanism to improve the overall quality of the stock market and regulate backdoor listing.

“The CSRC will require stricter information disclosure to deter financial cheating, urge intermediaries like accounting agencies and stock exchanges to fulfill due responsibility and modify delisting standards,” said Jiang Yang, deputy head of the CSRC, last week.

Lincoln to make SUV in China with Chang’an Auto Group

Lincoln, the luxury unit of Ford Motor Co, said on Monday that it plans to build a luxury sport utility vehicle in China in partnership with the Chang’an Automobile Group.

The as-yet unnamed vehicle will be built at a plant in the city of Chongqing. It is scheduled to go on sale in late 2019 only in China, the world’s largest auto market, according to Lincoln spokesman Said Deep.

Building in China will help Lincoln meet growing customer demand and enable the company to become more responsive to changing customer preferences, Deep wrote in an email. “As Lincoln grows in China it makes sense to produce this new SUV in China,” he added.

Lincoln exports its vehicles from North America to China, and reported sales of 32,558 in 2016, three times more than it sold in 2015.

Ford and its joint venture partners sold a record 1.27 million vehicles in China last year. Lincoln isn’t the only US luxury brand taking aim at China. General Motors said its Cadillac volume in China rose 46 percent in 2016 to 116,406 , the first time it passed 100,000 vehicles in China in a single year.

Boeing’s first overseas factory to be built in China’s Zhoushan

Boeing and Chinese aviation manufacturer Commercial Aircraft Corporation of China Ltd.(COMAC) will start to build a Boeing 737 completion center in eastern China’s Zhoushan city at the end of March, scheduled to make its first delivery in 2018.

This is Boeing’s first overseas facility as part of its 737 production system, and designed to deliver 100 Boeing 737 planes a year.

In the joint-venture completion center, Boeing’s 737 aircraft will be installed with flight entertainment systems and seats. The plant in Zhoushan, 287 km southeast of Shanghai, also provides services such as coating, repair and maintenance of Boeing aircraft.

Boeing and COMAC signed an agreement in October 2016 to set up the Zhoushan plant, which will consist of two parts: the 737 completion center, a joint venture of Boeing and COMAC, and the 737 delivery center owned by Boeing.

Construction of the delivery center will also start at the end of March.

To accommodate aircraft manufacturing in Zhoushan, Putuoshan Airport in the city is undergoing a 750 million yuan (108 million U.S. dollars) expansion to become an international airport.

In addition to supporting Boeing, the aviation base in Zhoushan will also develop an entire industrial chain for aircraft manufacturing, with the capacity of assembling, delivering and modifying 600 aircraft a year by 2025.

Zhoushan is an archipelago and island city in Zhejiang Province, which has the largest fishery in China and boasts strong shipbuilding, tourism and service industries.

5% listed Chinese companies led by females

A female user of Red (Xiao Hongshu) poses with the company’s staff at its anniversary celebration in Shanghai.

About one in every 20 A-share companies is led by female, according to a report by Securities Times released on International Women’s Day on Wednesday.

The number of chairwomen in Chinese mainland-listed firms totals 151, accounting for 5 percent of all top posts. Equipment manufacturing, pharmaceuticals, chemical engineering, real estate, and automobile are the top five industries with most female business leaders.

About 70 percent of the chairwomen were born in the 60s or 70s, according to the report. Corporate head Hu Jiajia of Shanghai Metersbonwe Fashion & Accessories Co and Liu Xiaoqing of Dalian Yi Qiao Sea Cucumber Co, both 30, are the youngest.

Of the 153 A-share firms run by women, 56 are listed on Shanghai Stock Exchange, 45 on Shenzhen small-and-medium enterprise board, and 31 on NASDAQ-styled ChiNext board.

Among the 145 chairwomen who have disclosed their education background, four have doctorate degree and 10 have studied abroad, noted the report.

According to a survey by professional networking site LinkedIn, 44 percent of all senior management roles in companies were held by women last year.

The need to balance family obligations and pressure from society are still believed to be major obstacles for women in the business world.

Beijing crowned ‘Billionaire Capital of the World’ for second year: Hurun

Beijing beat New York City to become the “Billionaire Capital of the World” for the second year running, according to Hurun Global Rich List released on Tuesday.

The new list ranked 2,257 billionaires, up 69 from last year and a growth of 55 percent or 804 over the last five years.

Total wealth among billionaires increased by 16 percent to $8.0 trillion, equivalent to 10.7 percent of global GDP, and up from 7 percent of global GDP five years ago.

Rupert Hoogewerf, chairman and chief researcher of Hurun Report, said global wealth is being concentrated in the hands of the billionaires at a rate far exceeding global growth.

New York has the highest concentration of billionaires, with 86, followed by San Francisco and Los Angeles on 29 and 23 respectively. The USA is the world’s capital for immigrant billionaires. Two-thirds self-made, with one-third inherited. Average age among USA billionaires increased to 66, two higher than the list average.

Bill Gates, 61, is still the richest man in the world, despite only growing 1 percent to $81bn. Warren Buffett, 86, held onto second place, increasing his wealth to $78 billion, up $10 billion after a surge in the Berkshire Hathaway share price.

Jeff Bezos, 53, of Amazon, has broken into the Top 3 for the first time. Mark Zuckerberg, 32, the youngest of the Top 10, shot up to fifth, his highest ranking yet.

Chinese billionaires led the USA for the second year running, with 609 compared with 552, up 41 and 17 respectively. Hoogewerf said “China and the USA have half the billionaires in the world.”

The combined net worth of Chinese billionaires is $1.6 trillion, 2.1 percent of the global GDP. Real Estate has generated most billionaires (120), followed by Manufacturing and TMT with 115 and 78 respectively, according to the report.

China is number 1 in the world in terms of generating self-made billionaires akin to “rags to riches” and is home to two-thirds of the world’s self-made female billionaires.

Led by Beijing, 5 Chinese cities made the top 10 cities and 7 the Top 20. Average age is 58, six years younger than the list average.

Shenzhen surprised many by adding 16 billionaires to propel it into fourth place, just behind Hong Kong.

A February IPO propelled Wang Wei, 46, of SF Express to third spot, with a five-fold growth in his wealth to $27 billion, just behind Wang Jianlin and Jack Ma. Corporate raider Yao Zhenhua of Baoneng saw the fastest growth on the list, rising almost eight-fold to $15 billion.

Investments overtook tech to become the main source of wealth for American billionaires, with 121 and 112 billionaires respectively, followed by retail with 57. The combined wealth of U.S. billionaires was $2.6 trillion, 3.4 percent of global GDP.

Telecom carriers to end domestic long-distance, roaming charges from Oct

A mobile phone user walks past a logo of China Mobile’s 4G service in Qingdao, Shandong province.

The country’s three telecom carriers, China Mobile Communications, China United Network Communications Group and China Telecommunications Corp, announced steps to scrap domestic long-distance and roaming charges from October 1, 2017, a move to drive forward industrial transformation and boast the upgrading and adjustment of real economy.

Li Yue, president of China Mobile, the country’s largest telecom operator said the domestic roaming charges account for 8 to 10 percent of its total revenue, removal of such fees will have an influence on the company, adding this will encourage China Mobile to improve operation and management efficiency.

China Unicom said it will increase the coverage of broadband access, develop innovative applications, and upgrade products and services in response to the initiative of “increasing broadband access speed and reducing tariff” by the authority.

The Ministry of Industry and Information Technology (MIIT) will push forward the initiative with more effective measures.

“We will strive to remove completely the domestic long-distance and roaming tariffs for mobile users, greatly reduce the tariff for international long-distance call and dedicated internet access price for small- and medium-sized enterprises,” said Chen Zhaoxiong, vice-minister of industry and information technology.

The ministry will make efforts to regulate the tariff-setting behaviors of enterprises, promote healthy market competition and continue to improve market environment of telecommunications.

China’s factory-gate inflation picks up in January

China’s producer price index (PPI), which measures costs of goods at the factory gate, quickened growth pace year on year in January, fresh evidence of strengthening demand in the world’s second-largest economy, official data showed Tuesday.

The PPI rose 6.9 percent year on year in January, an increase on the 5.5 percent registered in December 2016, according to the National Bureau of Statistics (NBS).

This represented the fifth straight month expansion of the PPI on a year-on-year basis and the highest reading since August 2011.

On a month-on-month basis, the PPI edged up 0.8 percent, with the growth pace narrowing down from the 1.6 percent recorded in December 2016.

NBS senior statistician Sheng Guoqing attributed the monthly PPI gain to factors including the carry-over effect of last year’s price changes, spiking prices of metal, fuels, chemicals and other raw materials.

Factors including rebounding domestic demand and reducing outdated capacity helped push up the PPI and the index is likely to remain high in the coming months, according to Wen Bin, a senior researcher at China Minsheng Bank.

The January PPI figure outstripped market expectations, and Chinese policymakers should be alert to inflationary pressure caused by rapid PPI growth, according to Wen.

The PPI figures came alongside the release of the consumer price index, which rose 2.5 percent in January year on year, partially due to holiday effects.

Used car sales on upward trend as provinces remove trade barriers

China’s used car sales hit a record high in 2016, posting 10.3 percent growth year-on-year, as local authorities have been removing barriers on cross-provincial-border vehicle sales.

Statistics from the China Automobile Dealers Association show that 10.39 million used cars were sold last year. Industry insiders expect yet more to be sold this year.

Although the sector’s growth did not keep up with surging new car sales, which saw a 13.7 percent growth rate in 2016, it was the first double-digit growth in used car sales for the past several years, said Luo Lei, the association’s deputy secretary-general.

“The hard-won achievement was mainly a result of local governments gradually opening their markets to used cars from other regions,” said Luo.

The State Council, China’s cabinet released an eight-article guideline in March 2016, instructing local governments to lift any limitations on the flow of used vehicles between provinces by the end of May. China has 172 million cars, but local bans have curbed the free flow of used cars, resulting in insufficient supply. However, the policy has not worked out, according to Luo. He said the association’s monitoring shows that while seven provinces, including Sichuan and Heilongjiang, have fully removed the barriers, many others have failed to do so.

Luo said those seven provinces saw double-digit growth in their used car sectors, which was significantly higher than that recorded in the provinces that did not remove the limitations.

Industry insiders say local authorities have failed to lift the ban because used cars usually have higher emissions and contribute less to the local economy than new cars. Luo said more regions will catch up now that the Ministry of Commerce and the Ministry of Environmental Protection have issued orders to implement the State Council’s guideline. He expects sales this year to hit a new high as a result.

“Used car transactions accounted for 5.8 percent of China’s total car sales last year. As local authorities remove their bans, it may return to the normal level of 7.3 percent, which will be 12.5 million vehicles,” Luo said.

Xiao Zhengsan, secretary-general of CADA, calls for more attention to be given to the sector’s development, saying used cars will contribute to China’s automotive market’s growth.

“China has become the world’s largest auto market, but if its growth is driven by stimulus policies, it is not healthy,” said Xiao.

According to Xiao, used cars and car finance will prove to be two critical and healthy market forces. “I will say, if we fail to do a good job in used cars, then it is impossible for us to do a job in terms of new cars sales. In one or two years you will see if I am correct,” he said.

In developed markets such as the United States, used car sales are usually more than double those of new cars, while in China, they represent less than 40 percent of new car sales.