E-commerce giants competing fiercely during June

Tmall launches major discounts to rival JD sale

China’s leading online retailer tmall.com launched Wednesday a sales promotion for consumer electronics and home appliances, a move analysts said heats up the battle with its major rival JD.com Inc (JD) which regards the day as a special shopping festival due to it being the anniversary of the company’s founding date.

Tmall.com, backed by the country’s e-commerce giant Alibaba, offered discounts between 60 and 70 percent for home appliances and lowered smartphones’ prices by 100 yuan ($16) to 1,000 yuan.

Meanwhile, JD, which has been building up a shopping spree atmosphere since June 1, rolled out its strongest sales promotion to date for Tuesday to Friday, cutting prices of consumer electronics by up to 2,000 yuan and providing 90 percent discounts for some home appliances.

The four-day event is a part of JD’s 20-day promotion for its 11th anniversary this year on Wednesday, involving consumer electronics, cosmetics, food and books. The promotion has triggered the price war between the e-commerce players.

Tmall.com also launched a four-day sales promotion from Monday, which analysts said mainly focus on consumer electronics and home appliances in response to JD’s strongest discounted sales. JD’s smaller rival yhd.com (YHD) even claimed on its official website that all consumer electronics it sold would be 50 yuan cheaper than those on JD from Monday to Wednesday. Gome.com and suning.com, the home appliance online shopping platforms of major local retail chains, also joined the price competition almost during the same period.

“JD is under siege,” said Lu Zhenwang, founder of Shanghai Wanqing Commerce Consulting.

He explained to the Global Times Wednesday that all e-commerce platforms intend to tap the profitable consumer electronic retailing sector where JD has further consolidated its leadership after combining with yixun.com, a consumer electronics online shopping platform developed by Tencent early this year.

Despite the ambitious efforts of YHD and Gome, Lu said that they can hardly pose big threats to JD.

Tmall is JD’s strongest rival and is likely to win the battle this time due to its large user base, said Li Yi, secretary-general of the China Mobile Internet Industry Alliance.

A report issued in May by Analysys International shows that Tmall is the most preferred online shopping platform with its active users reaching 112.06 million in the first quarter of 2014. The active users on JD hit 44.2 million, ranking in second place.

Tmall’s strong cooperation with the three State-owned telecom carriers and domestic home appliance makers also give it more competitive advantages over JD, said Lu.

During this sales promotion, Li Xiao, a Beijing-based white-collar worker, went to Tmall and bought a trendy smartphone Wednesday.

“The reason to choose Tmall instead of JD is simple. The three telecom carriers all opened online flagship shops on Tmall and offer discounted phones on the platform that cannot be found on JD or other platforms,” she told the Global Times Wednesday.

A total of 500,000 handsets have been sold in the first 10 hours, accounting for half of the average daily sales of smartphone in China, according to a press release e-mailed to the Global Times Wednesday by Tmall.

A PR representative from JD told the Global Times Wednesday that the average sales of handsets and related accessories reached more than five per second on Wednesday morning.

Both Lu and Li Yi believe that the price war is still the major promotion method in China where many consumers are sensitive to price, but they said e-commerce platforms this time are also trying other ways of marketing to attract people.

Between May 30 and June 14, JD sent cash gifts – which can be applied to online purchases – worth 1 billion yuan to users of its mobile application to draw attention to its sales promotion.

Tmall is also giving away cash gifts worth 50 million yuan to shoppers during its current promotion.

Although consumers can benefit from the heated competition and price war [during this period], Li Yi suggested that they consume reasonably and buy things that are really needed.

“Some goods may be even more expensive than before. People need to carefully compare the price tags of goods before placing an order,” he noted, calling for more supervision from the authorities during the sales.

Lu noted that these retailers are all focusing on consumer electronics and home appliances, which is a wise decision given that June usually sees many purchases of such goods.

Big sales will challenge e-commerce platforms’ logistics and post-sales services, which need to be further improved, he remarked.

Alipay-housing authority launch virtual transport card

Alipay, the e-payment arm of Alibaba Group Holding Ltd, teams up with China’s Ministry of Housing and Urban-Rural Development to launch a service on Wednesday that allows commuters use public transport without IC cards or waiting in line to buy a ticket.

Through wiping near-field communications-supported mobile phones at readers at public transport stations, people can travel in a more convenient style. What they need to do is to buy a NFC-enabled mobile phone, download Alipay Wallet, the app of Alipay, and apply for a virtual public transportation card through the app.

The service is one part of Alipay’s project named “future pubic transportation”, which aims to build a public system that offers convenient service in the mobile Internet era.

The NFC-based public transportation service co-launched by Alipay and the housing authority is expected to be available soon in 35 cities, including Shanghai, Tianjin, Shenyang and Ningbo. According to Alipay, as many as 60 cities in China are expected to join the project by the end of this year.

Ma Hong, director of the pubic transportation service center at the Ministry of Housing and Urban-Rural Development, said that with the economic progress, people are traveling more frequently.

“Because different cities use different IC cards for public transport, people have to buy new cards whenever they go to a new city. It is high time to find a unified solution to this problem,” Ma said, adding that thanks to the service co-launched by Alipay and her ministry, people can now travel in a more convenient way.

Through teaming up with Alipay, which has about 100 million mobile users, the ministry can effectively boost the user group of the virtual IC cards. Alipay said in a statement that it will open its resources to mobile phone makers and public transport authority in order to improve the transport system in China.

Robot sales shift to higher gear as labor force wanes

Robotics companies are expected to triple sales in China to around 110,000 sets by 2020 as more Chinese manufacturers embrace the high-end growth path, a senior industry official said on Tuesday.

Wang Ruixiang, head of the China Machinery Industry Federation, said based on the rapid growth of the nation’s robotic industry in recent years, the federation has set a high target and the government will continue to provide support for the industry’s development.

By 2030, sales of industrial robots will reach 290,000 sets and a couple of Chinese companies would be among the top five robotics companies in the world, Wang said.

“As the world’s second-largest economy, China has huge potential in the robot market, which is prompting more foreign and domestic companies to invest in the sector,” he said.

According to a recent United Nations report, China is likely to see a sharp fall in its labor force by 2015. The labor shortage and the lack of advanced technologies represent huge business opportunities for the robotics sector, said Song Xiaogang, secretary-general of the China Robot Industry Alliance.

According to data provided by the alliance, 37,000 industrial robots were sold in China last year, a 36 percent growth over 2012.

China became the largest robot consumer market, with one-fifth of the global market share, overtaking Japan and the United States in 2013, said the alliance.

Haier Group, a consumer electronics and home appliances company, is one of the Chinese firms that is embracing robotics in a big way. The company plans to cut 10,000 employees this year after laying off 16,000 employees in 2013, according to Zhang Ruimin, chief executive officer of the company.

Zhang said most of the layoffs this year will target mid-level employees, as the mechanization process gathers momentum. He constantly stressed the idea that in the long run the manufacturing sector would need to use more technology like robots.

Haier is not alone in using robots among home appliances companies.

Foxconn Technology Group, an electronics manufacturer, plans to use 300,000 robots by the end of this year to replace repetitive and dangerous jobs on the production line.

Although the industry is booming with a rapid growth rate in recent years, Chinese robot makers are still facing challenges like lower market share in high-end products as well as shortages in innovation and technology, Song said.

Foreign companies produced more than 27,000 of all the robots sold in China last year. About 80 percent of these are multi-joint robots, with advanced technologies. Chinese companies mainly produce coordinate robots, which are mostly used for delivering goods in different industries.

“Despite a top market demand, China has only a few leading firms that are able to compete internationally,” Song said. “Due to the scarcity of technical talent, the robotics industry has encountered a bottleneck, especially when it comes to detailed industry segments.”

He Rui, director of Mianyang Fude Robot Co Ltd, a Sichuan-based company, said the company has been undertaking research and development on new types of robots that can be used by various clients.

“We are focusing on areas that are not dominated by foreign companies,” he said.

He added that the company sold about 40 industrial robots last year. Fude Robot aims to triple revenue from the current 20 million yuan ($3.22 million) to 60 million yuan in three years.

China surpasses US as world’s top corporate borrower

Sluggish capital market limits funding: expert

The Chinese mainland has surpassed the US as the world’s top corporate borrower, and higher debt risk in the world’s second-largest economy may mean greater risk for the world, a report said on Monday.

However, Chinese economists noted that the debt risk in China’s corporate sector is still well under control.

Nonfinancial corporate debt in the Chinese market was estimated at around $14.2 trillion by the end of 2013, overtaking the $13.1 trillion debt owed by the US corporations, a progress happening sooner than expected, said a report from the Standard & Poor’s Ratings Services on Monday.

The report expects that by the end of 2018 debt needs of mainland companies will reach $23.9 trillion – around one-third of the almost $60 trillion of global refinancing and new debt needs.

“It [the mainland surpassing the US as the largest corporate borrower] is not surprising at all, as the [size of] mainland non-service sector has already surpassed that of the US,” Tian Yun, an economist with the China Society of Macroeconomics under the National Development and Reform Commission, told the Global Times on Monday.

Cash flow and leverage at mainland corporations has worsened after 2009, and debt risks in the property and steel sectors remain a particular concern, the report said.

Private companies are facing more challenging financing conditions – highlighted by China’s first corporate bond default case of Shanghai Chaori Solar Energy Science and Technology Co in March and another case of default of leading private steel maker Shanxi Haixin Iron and Steel Group.

“The capital market has been sluggish during the past few years, leading to the fast growth in corporate debts,” Xu Hongcai, director of the Department of Information under the China Center for International Economic Exchanges, told the Global Times Monday.

Experts noted that the rapid growth in debt reflected some problems of the Chinese economy, but the size of the debt is still in a safe range and will not cause major risks as the economy remains stable.

“The problems of the Chinese economy are institutional and structural,” Tian said, “By addressing these issues, debt risks can be managed.”

Tian further noted that most corporate debts in China are internal debts, thus debt problems in the country will have limited impact on the rest of the world.

The report also said a possible contraction in “shadowing banking” will be detrimental to businesses as general.

But Xu noted that China’s tighter supervision of the “shadow banking” sector will make it more transparent and better-regulated, which will reduce the potential risks in the sector.

‘Made-in-China’ shines at World Cup

Though the Chinese soccer team is again absent from the World Cup, Chinese products, from mascot Fuleco to official instrument the caxirola and hybrid buses, stand out.

“Since March, our factory has continuously received overseas orders. By the opening of the event, we had exported more than one million footballs,” said Wu Xiaoming, general manager of a sports products manufacturer in Yiwu city, in east China’s Zhejiang province. Many orders came from South American countries.

The World Cup has been great for Yiwu, the world’s largest wholesale center for small commodities and accessories. “Our clients are mainly from Europe. Since April last year, we have sold nearly two million caxirolas,” said Wu Xiaogang, manager of a company which produces the cheerful instrument. Compared to the vuvuzela at the 2010 World Cup in South Africa, the profit on each caxirola is more than double. It is estimated that around 90 percent of caxirolas worldwide are produced in Zhejiang and Guangdong provinces.

“Because of the World Cup, the sale of commodities to soccer fans has increased by nearly 30 percent and are mostly wholesaled overseas,” said Cheng Li, a dealer in Yiwu. Brazilian buyers are Cheng’s main clients.

In the first five months, Yiwu’s total exports to Brazil totalled 160 million U.S. dollars, up 31.4 percent year-on-year. Exports of sports commodities to Brazil were 2.78 million dollars, up 42 percent from the same period last year.

The soccer spectacular is a platform for Chinese products to display their strong competitiveness, more added value, higher quality and innovations.

Kayford Holdings Ltd, is the only licensee outside Brazil for plush mascot and 3D figurines.

“We have the final say on the pricing of the 3D figurines,” said Li Hong, president of Hangzhou Landward, the parent company. The company has designed nearly 100 types of commodities in five categories for the mascot series.

“Made-in-China” has become “China marketing” as the company can freely select suppliers and distributors, said Li.

The company has sold more than one million of its mascot products to 39 countries, said Huang Kunlun, chief sales manager.

“What we feel most proud of is that no quality complaints have been received,” he said. “‘Made-in-China’ is no longer a synonym for low-end products of poor quality.”

Other Chinese products are also shining at the World Cup.

Hybrid buses developed and produced by a subsidiary of China’s leading railway car manufacturer CSR Corporation Ltd, ferry the public between the airport and downtown Curitiba, one of the host cities.

As the sole Chinese sponsor at the soccer extravaganza, China’s major solar energy company Yingli Green Energy has provided 27 sets of photovoltaic systems for lighting devices in all the hosting cities.

Labor laws need to be overhauled

You see them everywhere in Asia.

They push street carts selling food and drinks, sell newspapers and water on busy intersections, and collect garbage for recycling while breathing in thick black smoke from the exhausts of trucks, buses and cars.

In the countryside they tend to small plots, growing just enough food to survive.

Despite Asia’s massive economic gains over the last 30 years, very little of this new wealth has managed to trickle down to the grassroots, or what economists call the “informal economy”.

The millions who work in the informal economy are not covered by formal employment agreements, which are so common in developed economies.

The International Labour Organization estimates the informal economy accounts for 60 percent of Asia’s workforce.

The real challenge facing governments in emerging Asia is how to improve and protect those in the informal sector who have no protection from the non-payment of wages, and who can be retrenched at any time without notice or compensation.

They work in dangerous, low-skilled jobs with poor occupational health and safety conditions. None of them are protected by social security nets.

On the other hand, the formal sector – areas such as manufacturing, financial services and technology – is suffering from a growing skills shortage.

Asia reaped huge economic benefits when manufacturing migrated from many developed countries. Low-end manufacturing has even been migrating from China.

The World Bank has said the region’s policymakers need to enact “labor regulations and social protection policies to benefit all workers, including those in the large informal economy”.

Christophe Duchatellier, the Tokyo-based CEO of human resources firm Adecco Asia, says there has been a “significant deregulation of challenging labor laws” in many countries in Asia.

But he says that more deregulation still needs to be done if countries are to become “competitive from a labor perspective”. Duchatellier says that over the last 20 years there has been a steady shift of industrial manufacturing from the West to the East.

Much of that shift was prompted by low productivity, high taxes and high wages in the West. “Companies need to do things cheaper and faster,” he says, adding that the idea of a full-time job or ‘job for life’ is fast becoming a thing of the past in many global and regional markets.”Young people want more options and will have more employers than we did in the past.”

He believes Asian universities and schools need to better prepare young people entering the workforce with the right skills to help them get jobs.

“We need to remember that for the majority of the world, education is about preparing people to get a job. More ‘later-in-life’ retraining and re-skilling is needed for those in sunset industries and where new technologies are emerging. And companies need to encourage more apprenticeships,” Duchatellier says.

A report released earlier this year by the World Bank, East Asia Pacific at Work: Employment, Enterprise and Well-Being, said: “Asia has seen rising productivity amid a brisk structural transformation, with large movement of people into cities and higher output in agriculture, manufacturing and services.”

“Countries that were poor a generation ago successfully integrated into the global value chain, taking advantage of low labor costs,” the report said.

Commenting on the report, Axel van Trotsenburg, regional vice-president of World Bank East Asia and Pacific, said: “The unprecedented economic development in East Asia Pacific has provided jobs and lifted millions of people out of poverty and has been a triumph of working people.

“It’s time now to consolidate growth by adopting social policies that protect people, rather than any particular sector, location or profession.”

When well-designed, those policies should make sure social protection and labor regulations benefit the most vulnerable workers in society.”

The World Bank said that as economic growth is moderating and labor costs are rising, “constraints of the region’s current labor market and social protection policies are becoming a more pressing issue”.

China’s property climate index drops in May

China’s property development climate index dropped 0.77 points from April to 95.02 points in May, the National Bureau of Statistics (NBS) said on Friday.

The figure has declined month on month for four consecutive months.

In the first five months, the country’s investment in property development rose 14.7 percent year on year to 3.07 trillion yuan (about 500 billion U.S. dollars), slowing down by 1.7 percentage points from the Jan.-April period, the NBS said in a statement.

State Council makes logistics industry’s growth a priority

China is stepping up its efforts to develop its logistics industry, as the government announced its goal of building a modern national logistics service system by 2020.

The State Council’s executive meeting, chaired by Premier Li Keqiang, approved a plan on Wednesday to develop the logistics industry in the middle and long term.

The move aims to lower the operational costs of logistics enterprises and improve logistics infrastructure networks, as well as to develop large-scale companies to improve the industrial chain, according to a statement released after the meeting.

China’s economy has grown at a fast pace, but its logistics and transportation sector as a whole remains in comparatively early stages of development.

The fierce competition has created a market in which rivals offer similar and limited services.

A total of 12 logistics issues, including services for agriculture, manufacturing, industrial material supply chain and recycling materials, will become priorities because these businesses can create more new market growth points to the industry, the statement said.

The government will accelerate the reform pace to upgrade the management style of various couriers and crack down on illegal charges and regional protectionism to create a fair market environment.

It also promised to ensure land supplies and use for building logistics service facilities such as warehouses and package sorting centers, to improve the statistical system of logistics costs, and to introduce preferential financial policies for the sector.

Zhou Zhicheng, deputy director of the research department of the China Federation of Logistics and Purchasing in Beijing, said making medium- and long-term plans is a useful way to optimize industrial structure, as diversified distribution models and the fast development of e-commerce today have changed the operation method and network density of China’s logistics market.

“As more Chinese companies are inclined to expand and create new businesses nationwide, their demand for logistics will expand beyond coastal cities, with broader national network coverage, and consistent, upgraded and standard services will become a key differentiator in comparison with previous market condition,” Zhou said.

The meeting also arranged the work details of building an economic belt along the Yangtze River to underpin China’s sustainable economic development.

The statement stressed that the Yangtze River Delta is a key pole in China’s economic growth while the central and western regions along the belt boast the largest space for further economic growth.

China Mobile eyes 100b devices with 5G network

China Mobile Corp’s chairman Xi Guohua described his vision of the next-generation telecom network on Wednesday, saying the company is aiming to build a super-fast 5G network that could bring 100 billion mobile devices on the network.

The 5G technology, which remains on papers, will have a connection speed similar to the fiber Internet, the fastest fixed-line connection as of today, said Xi.

Xi, who heads the world’s largest carrier by subscriber number, did not disclose the possible launch date of 5G service. Analysts believe commercial use of 5G in China is years – if not a decade – away because the previous technology just kicked off in the country this year.

Local research of next-generation telecom technologies is most likely to get government support in the coming years however, meaning the development process could be greatly shortened.

Liu Lihua, vice-minister of the Ministry of Industry and Information Technology, told the Mobile Asia Expo on Wednesday that development of 5G technology will receive a “full government support” in the years ahead.

China Mobile launched its 4G networks in the country about half a year ago. Coverage of China Mobile 4G is mostly confined in city areas in developed coastal regions today. Xi pledged to add the amount of 4G stations to half a million by year end.

Will China’s housing market strike iceberg?

Will the bubble in China’s real estate burst in the near future, just like the titanic hitting the iceberg?

The answer may be no, some experts said.

After a round of soaring prices, the housing market is showing increasing signs of cooling down.

May was the fifth consecutive month in which the rate of price growth slowed.

Worries raised high that the decline may continue as banks become reluctant on mortgage lending.

According to official data, sales of residential property slumped 7.7 percent during the first quarter of 2014 to 1.1 trillion yuan (about 176.6 billion U.S. dollars). Month to month, home prices have been falling in more of the 70-strong pool of major cities surveyed by the National Bureau of Statistics.

When asked whether China’s housing market is experiencing a “turning point” as sales have plunged in recent months, Feng Jun, chief economic manager with the Ministry of Housing and Urban-rural Development, said recently changes in the housing market are normal and should be viewed in a broader context.

He reiterated that the aim of property control policies is to create a balanced and steady market.

“The policy is to protect reasonable buying demand and to restrain investment,” he said.

The fact is that the underlying demand-supply equation has changed, with ongoing construction exceeding the demand of a growing urban population and upgrading.

Meanwhile, investment demand is being eroded by stagnant property prices, the anti-corruption drive and investment alternatives such as wealth management products and overseas assets, according to investment bank UBS AG.

“We do not expect a sudden collapse of property prices or a financial or balance-of-payments crisis, as is often seen in emerging economies,” said Wang Tao, China economist with UBS.

A big drop in construction activity—even without a large price correction—would likely have a serious negative impact on the industrial complex and, through that, economic growth and banks’ balance sheets.

Hence, at present the real estate market is facing a serious adjustment, and the era of the secular property boom is forever behind us, he added.