Category News of China

Coca-Cola opens biggest bottling plant in N. China

Coca-Cola’s biggest bottling plant in north China began operating Thursday in Xianghe County of Hebei Province, southeast of Beijing.

The plant will produce bottled water, Coke and Sprite, mainly to serve Beijing, Tianjin, Hebei and neighboring regions, according to Luan Xiuju, president of COFCO Coca-Cola Beverages, a joint venture of Coca-Cola and China’s COFCO Corporation.

The first phase of the plant involved investment of 500 million yuan (76 million U.S. dollars).

As Coca-Cola’s third-largest market, China offers exciting opportunities and the firm has full confidence in the Chinese market, said James Quincey, President and Chief Executive Officer of Coca-Cola.

Quincey said the firm will continue to work with COFCO to offer new products for Chinese consumers.

Industrial internet to boost smart manufacturing

China’s push to develop industrial internet will inject a fresh impetus to the development of smart manufacturing as well as the integration of the industry and the internet, analysts said on Wednesday.

“Accelerated steps on industrial internet are of significance to China’s advanced manufacturing amid fierce competition from abroad. It will help promote deeper integration of the country’s real economy with internet, big data and artificial intelligence,” said Yang Chunli, a researcher at the China Center for Information Industry Development, a Beijing-based think tank.

The State Council, China’s cabinet, earlier this week unveiled a guideline that aims to build three to five industrial internet platforms, which will reach international standards by 2025 and lead the world in key areas by 2035.

Specifically, the country will build about 10 cross-industry platforms by 2020 to accelerate digital transformations at enterprises. The industrial internet refers to a network of combined, advanced machines with internet-connected sensors and big-data analytics. It is designed to boost the productivity, efficiency and reliability of industrial production.

Qianzhan Industry Research Institute forecast that the market size of China’s industrial internet sector will hit 10.8 trillion yuan ($1.64 trillion) in 2025, without disclosing the figure for this year.

“To compete with the world in internet and manufacturing, China must foster national platforms, which will act as main pillars of future industrial transformation. Key industries such as automobiles, digital, energy and aerospace are some of the potential areas to establish such national platforms,” Yang said.

According to a recent report from Alliance of Industrial Internet, China’s industrial internet sector is still in its infancy, as a group of Chinese companies, including Sany Heavy Industry Co Ltd, started tapping into the sector several years ago.

Earlier this year, the Ministry of Industry and Information Technology also selected 206 smart manufacturing pilot projects, of which 28 are related to industrial internet innovation.

Now, around 50 percent of the world’s industrial platforms are provided by US enterprises and China still faces a gap with developed countries in terms of function, degree of commercialization and integrity of the whole ecosystem, according to the report.

Yang also noted that a group of companies including Rootcloud and Haier Group did quite well in industrial internet but most of them focus on certain vertical areas with limited users and resources, which still lag behind world-leading platforms such as General Electric’s Predix and Siemens’ MindSphere.

“However, most industrial platforms across the world are in the early stage of commercialization and are still on the way of exploring the market. In other words, China stands almost at the same starting line with developed countries,” Yang said.

“Even though some enterprises started to map out industrial internet long before, they just launched their products and the service system still needs to be improved,” she added.

JAC, Volkswagen to jointly develop multi-functional cars

Anhui Jianghuai Automobile (JAC Motors) and Volkswagen Monday signed a memorandum on a joint venture to develop and market multi-function vehicles.

The two companies will discuss possible options for a joint venture which will develop pickup trucks, MPVs and electric cars.

The venture will be half-owned by JAC and half-owned by Volkswagen. It will be based in Hefei, capital city of central China’s Anhui Province, hometown of JAC.

It will be the second joint venture between JAC and Volkswagen, as the two companies signed an agreement in Germany in June to establish a 50-50 joint venture to develop, produce and market new energy cars and related mobility services.

Chinese companies abroad hire more local employees

Chinese companies abroad hired 118,000 more local employees in 2016 than in 2015, according to the country’s top economic planner.

The number of local employees working for Chinese companies abroad rose to more 1.3 million last year, said Zhou Xiaofei, deputy secretary-general of the National Development and Reform Commission, at the 2017 International Industrial Capacity Cooperation Forum and the 9th China Overseas Investment Fair, held in Beijing.

China’s global outbound direct investment, which includes corporate mergers, acquisitions and start-ups, reached nearly 1.4 trillion U.S. dollars by the end of 2016.

Foreign direct investment (FDI) into the Chinese mainland added up to 1.8 trillion U.S. dollars by the end of last year, according to Zhou.

FDI into the Chinese mainland claimed has been third highest in the world for nine years in a row.

“Foreign-funded enterprises contributed one-fourth of the country’s industrial output, one-fifth of its treasury income and one-tenth of urban employment,” Zhou said.

Alibaba places $2.8 bln bet on ‘new retail’ amid saturated markets

Places $2.8 bln bet on ‘new retail’ amid saturated markets: analysts

Alibaba Group announced on Monday that it would invest about $2.88 billion into one of China’s largest grocery operators as part of a broader drive to integrate traditional offline and online retailing and create a “new retail” environment.

The move represents the e-commerce giant’s answer to pressure from rival JD.com Inc, which has a big presence in online grocery retailing, as well as to saturated online and physical retail markets, experts noted on Monday.

Alibaba said that, as part of a strategic alliance with Auchan Retail SA and Ruentex Group, it will invest HK$22.4 billion ($2.88 billion) to acquire a total direct and indirect stake of 36.16 percent in Sun Art Group.

Under the alliance, Auchan Retail and Ruentex will hold 36.18 percent and 4.67 percent stakes, respectively, in Sun Art, which operates 446 hypermarkets in 29 provincial-level regions in China, the companies said in a joint statement on Monday.

“The alliance reflects Alibaba’s ‘New Retail’ vision to leverage its Internet-based approach and new technology, while working closely with retail partners to provide a seamless online and offline experience to consumers in China,” read the joint statement.

“By fully integrating online and physical channels together with our partners, we look forward to delivering an original and delightful shopping experience to Chinese consumers,” Alibaba CEO Zhang Yong was quoted as saying in the statement.

“I think this deal will have a positive impact for both parties. From the Alibaba side, the deal will further strengthen its efforts to integrate online and offline to build the ‘New Retail’ environment,” Veronica Wang, an associate partner at global consultancy OC&C Strategy Consultants, said in a note to the Global Times on Monday.

Wang added that Sun Art could potentially leverage Alibaba’s strong digital capabilities, not only at the consumer level but also through the back-end supply chain, to provide a seamless online-to-offline (O2O) experience for consumers in China.

The alliance represents the latest move in Alibaba’s aggressive investment in brick-and-mortar retailers in recent years, including electronics retailer Suning Commerce Group and supermarket chain Sanjiang Shopping Club Co. Since 2015, Alibaba has invested more than $9.3 billion in physical stores, Reuters reported on Monday.

Lu Zhenwang, founder of Shanghai Wanqing Commerce Consulting, said that Alibaba’s approach in the physical retail market is aimed at “huge competition from JD.com” because the latter has built up a big presence in online grocery retailing with its own robust off-line resources such as storage, while Alibaba was focused on increasing independent sellers and brands on its platforms.

“Retail markets both online and off-line have peaked in recent years and growth has been showing signs of slowing, and Alibaba is trying to create a new retail environment that could extend into the O2O retail market,” Lu told the Global Times on Monday, adding that Sun Art’s strong presence across China could support Alibaba’s efforts.

At the end of the Alibaba “New Retail” push is the much larger consumer base than those currently online, and that’s a “huge potential” market for Alibaba and for physical stores, according to Liu Dingding, a Beijing-based independent analyst.

“Think about it. There are only 700 to 800 million Internet users in China but the population is 1.3 billion. What about the rest? They are also consumers, so I think that’s what Alibaba is after; it wants to reach everyone in China,” Liu told the Global Times on Monday.

Macao restaurants, retailers business performance better than expected

The proportions of restaurants and retailers reporting a year-on-year growth of revenue were higher than those in August, and they were optimistic about the business prospects in October, the Macao Special Administrative Region’s (SAR) statistics department said on Sunday.

Latest report by the Statistics and Census Service (DSEC) indicated that the business performance of the interviewed restaurants or similar establishments and retailers in September 2017 was better than expected with improved business conditions.

Among the interviewed restaurants or similar establishments, 45 percent registered a year-on-year rise of revenue in September, up by 12 percentage points from August.

For retail trade, the proportion of interviewed retailers reporting a year-on-year sales increase in September 2017 went up by 10 percentage points from August to 51 percent. On the other hand, 24 percent of the interviewed retailers registered a year-on-year sales decrease, down by 17 percentage points over August.

The DSEC report also said that benefited from the long holidays for National Day and Mid-Autumn Festival in October 2017, the interviewed restaurants or similar establishments expected a slight improvement in their business, with 27 percent anticipating a year-on-year rise in receipts in October, up by 6 percentage points from September.

Retailers were more optimistic about their business prospects in October, with 33 percent predicting a year-on-year sales increase, up by 8 percentage points from September.

Baidu may divest global assets, shift focus to AI

Internet giant Baidu Inc is considering spinning off its international division, as it focuses more on prioritizing artificial intelligence as a growth driver, according to a source familiar with the matter.

Following the closure of its mobile healthcare segment and the sale of its takeout delivery unit earlier this year, analysts said the Beijing-based company is aiming to reposition itself as a leader in artificial intelligence.

“Baidu wants to spin off those businesses that have less relevance to its AI strategy. As for the international unit, the company’s executives have been in negotiations about detailed issues, such as the price and shareholding structure,” said the person on condition of anonymity.

“When it is divested from Baidu, the international unit is very likely to be renamed,” the source added.

He said many issues need to be discussed, so the results may still be pending by the end of this year.

Baidu’s international unit has seven offices around the globe. Its products include the mobile ad platform DU Ad Platform, as well as several other mobile applications such as DU Speed Booster and Battery Saver. These international apps have more than 2 billion users in 200 countries and regions worldwide.

“The idea behind this spinning off is to gear up efforts to develop AI, since Baidu lost its luster in the age of mobile internet,” said Wang Huie, a senior analyst at Beijing-based internet consultancy Analysys.

Baidu did not confirm this information on Thursday.

The tech giant has been consolidating its core resources on AI-enabled business, in order to keep pace with its faster-growing rivals.

On Thursday, it announced it would roll out driverless buses next year. In addition, it has expanded its business into voice-assisted products and video-streaming entertainment.

Analysts spoke highly of Baidu’s strategy to refocus on AI.

“It’s a wise move. Baidu would stay ahead of the curve in the AI era, because it boasts massive data acquired from its search engine and rich funds.” said Wang, adding that Baidu might axe unprofitable non-core segments in the future.

But she was skeptical about Baidu’s plan to realize the mass production of driverless vehicles by next year.

Li Zhi, an analyst with Prestige Securities, said Baidu’s concentration on AI would help to shore up its profit margins.

The search engine company’s profit in the third quarter more than doubled, compared to a year earlier. In the same period, its total revenue rose to 23.49 billion yuan ($3.6 billion) from 18.25 billion yuan.

Shanghai’s AI sector set to flourish

Shanghai’s artificial intelligence industry revenue will hit 100 billion yuan ($15.2 billion) by 2020, and likely become the city’s new growth engine, top government officials said yesterday.

It will be a big market because AI is set to integrate with many sectors, including finance, transport, agriculture, healthcare and medical and automotive industries.

Shanghai plans to incubate AI “unicorns,” which are private firms with market value of over US$1 billion each, Chen Mingbo, chairman of the Shanghai Municipal Commission of Economy and Information Technology, said.

The city will build six industrial zones focusing on AI applications, establish a government-backed fund and open up data from government and telecommunications carriers. By 2020, Shanghai will be home to 10 global AI giants, according to a new government AI blueprint released yesterday.

“Shanghai doesn’t have BAT (Baidu, Alibaba and Tencent) now but I am confident we will own world-class AI unicorns in the future,” Chen said during a city government-held conference.

Open data, high-end talent and eco-systems covering finance and information infrastructure are Shanghai’s unique advantages, Chen added.

So far, Shanghai has opened up 17,000 categories of government data containing 260,000 projects, covering e-government and telecom data — more than other Chinese cities have released.

Shanghai firms have invested heavily in intelligent connection, robotics, smart devices and industrial-use sensors based on advanced smart manufacture and chip industries.

Meanwhile, Shanghai is drafting plans to attract overseas AI giants to set up facilities in the city as AI is a “globalization industry,” Chen added.

Labor boom prompts call for additional vocational training

A technician of CRRC Qingdao Sifang Co Ltd, a high-speed train manufacturer, gives instructions to students at a vocational school in Shandong Province.

The labor market needs more vocational education to lift the number of skilled workers in China, experts said at a recent seminar.

According to the Ministry of Human Resources and Social Security, the working population in China will face a sharp drop to 700 million by 2050 from 911 million in 2015.

Such a drop is sparking the demand for vocational education and creating a profound market. At the seminar held by JP Morgan, experts addressed on the importance of vocational education.

“The speed of industrial upgrading is going beyond expectation,” said Hao Jianbin, director of the Entrepreneurship and Employment Research Center at the Ali Research Institute. “It raised the salary for low-end labor and pushed the manufacturing factories (that) required less skills moving abroad.”

He said it is not very likely the quantity of labor can increase in the short run. Hence the market needs to see more investment in human resources to train more skilled workers to make up for the shortfall.

According to Qianzhan Industry Research Institute’s report, the market for vocational education in 2015 was 453.5 billion yuan ($68.3 billion), and the number is expected to double by 2020, creating a trillion-yuan market.

To promote people’s employability in the fierce job market, some vocational education has already seen a growing volume of students. Emerald Group, an education institution focusing on inter-net technology and digital entertainment, is one example.

“We have seen a rising demand for internet engineers in the domestic job market every year since it is a very prospective occupation,” said Chen Shengdong, chief executive officer of the group. “More and more graduates come here to enhance their competitive edge in the labor market.”

Chen said the institution will constantly change their course syllabi according to what is hot in the labor market, thereby serving the companies that are upgrading but struggling to find suitable employees.

From January to August this year, net profit of the group has reached 50.25 million yuan. The group is expected to bring in an annual 90 million yuan in net profit and predicts a stable 30 percent growth rate during the next two years.

Education in the high-end financial sector is also booming. Earlier this year, PricewaterhouseCoopers, or PwC, started its You Plus Special Training Program in Shanghai’s Lujiazui Financial City.

According to PwC’s report, more than 80 percent of senior executives in Chinese corporations said it is hard to find talent with practical problem-solving skills.

The full-time PwC program lasts for 12 months and can cost up to 300,000 yuan.

Cai Xiaoying, general manager of You Plus, said such training will help solve the imbalance between the supply and demand in human resources for Chinese corporations.

China’s online retail sales near $1t mark in 2017

China’s 2017 online retail sales is approaching $1 trillion that will buttress the country’s position as the largest e-commerce market in the world, S&P Global Ratings said on Monday.

The rating agency said the estimation is based on record online spending during the country’s Singles Day shopping carnival last Saturday. Driven by that, China’s online retail industry’s annual growth will be 20-25 percent in next 12-24 months.

According to Syntun, a Beijing-based e-commerce data provider, the online sales totaled 254 billion yuan ($38.26 billion) at this year’s event.

The huge number of transactions last Saturday indicated that Chinese online retailers still have enough space to grow, financial news portal stcn.com said quoting Shalynn Teo, an analyst at S&P.

More product categories will go online, and the increasing mobile penetration will promote the online sale momentum, Teo said.

In addition, purchasing online will become more popular in China’s third- and fourth- tier cities and rural areas, the analyst added.

China’s online retail sales surged 34 percent year-on-year to 5.54 trillion yuan in the first 10 months of this year, surpassing the 10.3 percent increase in overall sales of consumer goods, official data showed on Tuesday.

In next 12-24 months, the intense competition will put pressures on the Chinese online retailers, Teo warned, adding that the pricing power in addition to rising marketing and delivery expenses will lead the industry’s margins to slip.

“But higher growth and improving operating leverage will ease the risks,” Teo said.