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Johnson & Johnson trademark revoked in China

China’s top industry and commerce watchdog recently ruled that the trademark “OneTouch” for a line of blood glucose meters and test strips produced by LifeScan, a Johnson & Johnson company, violates Chinese trademark laws, and should be revoked.

According to Chinese laws, if Johnson & Johnson doesn’t file a lawsuit against the ruling in 30 days, or if a verdict isn’t reached within 60 days after the ruling was made, the Trademark Appeal Board of China’s State Administration for Industry and Commerce has the right to remove all of the company’s OneTouch products from the market.

Public security authorities can also confiscate the company’s illegal income from the product line in the past years, said Huang Yunzhong, an attorney from Beijing Peiwen Law Firm.

Huang is also the legal counsel of Guilin Zhonghui Biotechnology Co in the Guangxi Zhuang autonomous region, which has been under criminal investigation since 2007 for allegedly producing counterfeits of Johnson & Johnson’s OneTouch blood glucose test strips used by patients with diabetes.

In 2005, Johnson & Johnson recalled its OneTouch glucose meters, because instead of providing a warning, the meter turned itself off when it read a dangerous blood glucose level of 1024 mg/dL or above.

But later in 2006, Johnson & Johnson announced that it found a large amount of counterfeit blood glucose test strips from Zhonghui in China, which caused previous machine failures in its blood glucose meters.

Huang Yunzhong, the attorney, filed the dispute on the “OneTouch” trademark to the Trademark Appeal Board in late 2011, and the board reached the decision to revoke the trademark on Dec 27, 2013.

The recent ruling said “one touch” falls into a category of medical subject headings, so “OneTouch” cannot be trademarked.

Huang believes the ruling would bring about a favorable investigation result for Zhonghui on the accusations the company was making counterfeits.

Johnson & Johnson told China Daily it would comment on the ruling when the company had prepared a response.

Apple opens new online store on tmall.com site

Apple, the maker of iPhones and iPads, opened an online store Tuesday on tmall.com, China’s largest business-to-consumer online marketplace.

The store on Tmall was launched by Apple on Tuesday, providing an online selling platform in addition to the company’s online store, a customer service staffer with the online store said Tuesday.

The layout looks similar to Apple’s official online store for China, except for the logos and additional information of Tmall.

The price tags for Apple products on the Tmall store are exactly the same as those on Apple’s online store. It remains unknown whether special discounts will be offered on days such as November 11, known as Singles’ Day in China – similar to the Black Friday shopping bonanza in the US, according to the customer service staff member.

There has been no official announcement from Apple, and the Global Times could not reach Apple for comment by press time on Tuesday.

Yan Qiao, Tmall’s PR director, confirmed to the Global Times on Tuesday about the launch of the Tmall store by Apple.

The move came a few days after Apple unveiled its long-rumored deal with China Mobile, the world’s largest telecom operator by subscribers, which analysts believe will serve to prop up Apple’s market share in the country, where the US mobile gadget maker was losing ground to not only its nearest rival Samsung, but also an array of cheaper Chinese brands.

“With the Tmall store, Apple is set to embrace a broader customer base, as top online marketplaces have picked up steam in the country as an alternative to brick-and-mortar outlets,” Wang Jun, an industry analyst with Beijing-based Analysys International, told the Global Times Tuesday.

Handsets sold online in the market are estimated to represent 11 percent of the total in 2013, according to sales monitoring data from market research firm GfK China.

But Wang noted “the new store is unlikely to give a big impetus to Apple’s sales in the market.”

Only revolutionary new products from the company are likely to ignite the flame of consumers’ buying passion, he commented.

Mengniu agrees nutrition products tie-up with US firm

China Mengniu Dairy Co Monday announced that it has signed an agreement with leading US consumer food and beverage company WhiteWave Foods Co to jointly expand into the Chinese nutrition market.

In order to produce and sell nutrition products in China, a joint venture will be set up with the Chinese dairy producer holding a 51 percent stake and 49 percent to be held by WhiteWave, according to a statement filed by Mengniu on Hong Kong Stock Exchange on Monday. The venture formation is expected to obtain approval from Chinese authorities in the first half of this year.

Meanwhile, the venture has agreed to offer 376.7 million yuan ($62.2 million) to purchase Chinese infant formula maker Yashili’s nutrition plant, which is still under construction currently in Zhengzhou, Central China’s Henan Province, said the statement.

Mengniu is Yashili’s majority owner.

Mengniu has to diversify its product range, as the company’s core business – liquid milk – does not have much room for growth amid fierce competition from imported brands, Chen Lianfang, an analyst from Beijing Orient Agribusiness Consultant Ltd, told the Global Times Monday.

“China has seen a fast annual growth rate of more than 100 percent in imported liquid milk amounts in the past two years, as domestic consumers tend to prefer foreign dairy brands in the wake of the powdered milk scandal in 2008,” Chen said.

The latest financial information about Mengniu’s operation is not available to the public on the company website, but its mid-term financial results ending June 30, 2013 showed that the company gained 20.7 billion yuan, while its major rival Yili raked in more money over the same period, totaling 24 billion yuan.

According to the two companies’ mid-term financial reports, the sales of liquid milk products contributed to 88.3 percent of Mengniu’s overall revenues, with the rest mainly coming from ice cream.

Yili got about 75 percent of its revenue from liquid milk, but also makes money from products such as ice cream, milk powder and mixed animal feeds.

Mengniu also has been in the domestic milk powder market since 2006, but the company does not have a fairly satisfactory performance in this segment, resulting in its embrace of the country’s nutrition market this time, Yan Qiang, a researcher from Beijing-based Hejun Consulting, told the Global Times Monday.

An April report by Shenzhen-based market research firm China Competition Information stated that sales in the domestic nutrition industry reached 113 billion yuan in 2012, 32 percent growth year-on-year, forecasting the amount will surpass 430 billion yuan in 2018.

As China’s aging population is getting larger and the central government will implement the new second-child policy announced last November around the country in the near future, the demands for high-quality, especially foreign-branded or -invested, nutrition products will spike, said Yan.

Gregg Engles, CEO of WhiteWave, also sensed the potential boom in China’s nutrition market, as he expects that the tie-up with Mengniu could help his company access China, a promising market “with a rapidly growing, multi-billion dollar nutritious products segment,” according to a press release issued Sunday.

Mengniu could benefit a lot from the cooperation with WhiteWave in terms of technology as well as establishing its brand in the nutrition sector, Yan noted.

WhiteWave sells various goods such as plant-based foods and beverage as well as dairy products throughout North America and Europe.

However, Chen held a wait-and-see attitude toward the prospect of Mengniu’s nutrition operation, as the sector in China is faced with loose regulations and fairly chaotic competition.

“Mengniu, widely known as a liquid milk giant, will have to spend a fairly long time and lots of vigor in gaining consumers’ trust in the nutrition market,” Chen said.

Time for Xiaomi to end hunger game

Last week, Xiaomi Inc revealed its major achievements for the past year. In 2013, the tech up-and-comer sold 18.7 million handsets, up 160 percent year-on-year and well above the 15 million unit production target it set at the beginning of last year.

Based on its recent successes, Xiaomi founder Lei Jun promised to turn out 40 million handsets in 2014.

Enhancing productivity is now a top priority for Xiaomi, according to internal e-mails which also state that the company can’t keep up with demand.

Xiaomi appears to be breaking away from the starvation marketing strategy it has employed so skillfully to build a name for itself over the past three years. At this juncture, this is a wise move for the company.

In the beginning, Xiaomi could have made a convincing case that its limited output was the natural result of its limited production capacity. But now that Xiaomi has earned billions and is one of China’s largest tech brands, such a lame argument would only hurt the company’s reputation.

Moreover, scarcity is no longer a useful tool now that the market is overflowing with inexpensive, feature-packed smartphones.

Pudong Development Bank earns $6.7b in 2013

Shanghai Pudong Development Bank’s net profit jumped 19.8 percent year on year to nearly 41 billion yuan ($6.7 billion) in 2013, according to a filing to the Shanghai Stock Exchange late Friday.

The financial institution is the first listed commercial bank in China to disclose its 2013 results, Shanghai Securities News reported on Saturday.

Earnings per share stood at 2.195 yuan, up 19.8 percent from a year ago, according to the statement. Operating revenue stood at just over 100 billion yuan, up 20.61 percent year on year.

The lender’s total assets reached 3.68 trillion yuan, up 17 percent from a year earlier. Its total liabilities stood at 3.47 trillion yuan, up 17.1 percent from a year ago.

The lender’s non-performing loans ratio was at 0.74 percent, 0.16 percentage points higher than that at the end of 2012.

Its outstanding deposits totaled 2.42 trillion yuan by the end of 2013, up 13.41 percent from a year earlier. Outstanding loans reached 1.77 trillion yuan, up 14.37 percent from the end of 2012.

Tsingtao Brewery accelerates expansion

Tsingtao Brewery acquired a local beer producer in North China’s Hebei province, and launched a joint venture with another in Shijiazhuang, wrapping up a storm of expansion in 2013.

In a press release, Tsingtao said it would acquire Xinzhonglou, a 64-year-old brewery in Zhangjiakou on Dec 29.

Huang Kexing, president of Tsingtao, said the company will integrate and reengineer Xinzhonglou’s branding and distribution network. In addition Tsingtao will work with Xinzhonglou to invest 400 million yuan ($65.57 million) in a new brewery with an annual production capacity of 600,000 kiloliters.

Earlier, on Dec 16, Tsingtao entered a joint venture with Jiahe Brewery in Shijiazhuang to integrate Jiahe’s marketing network and seek mutual success. Tsingtao and Jiahe will each have a 50 percent interest in the joint venture.

The two projects will enable Tsingtao to enhance its competitiveness in North China by connecting its network across the northern and southern parts of Hebei province and increasing its exposure in neighboring Shanxi province and the Inner Mongolia autonomous region.

Huang said the company now puts more focus on the market network and is striving to ensure continued quality growth and innovation.

“Only with market expansion can we build more factories to expand production capacity,” he said. “As we uphold the principle of rational investment and value investment, the company’s strategic expansion has been yielding delightful market performance.”

In March, Tsingtao broke ground for a new brewery with a capacity of 600,000 kiloliters in Luoyang, in Central China’s Henan province. It began operations in December.

A 400,000 kiloliter brewery started in August in Jiujiang, Jiangxi province. Three relocation projects in Suqian, Wuwei, and Harbin were also completed before the end of 2013. Its breweries in Qingdao and Jinan have increased production capacity to meet strong market growth.

China’s beer industry slowed in the past two years. According to the National Bureau of Statistics, China produced 24.98 million kiloliters of beer in the first half of 2013, a 5.85 percent increase from the same period last year. The growth from January to June 2012 was 4.85 percent while the same period in 2011 saw growth in beer production of 11.4 percent.

Despite the countrywide slowdown, Tsingtao’s yield hit 7.53 million kiloliters from January to September 2013, up 11 percent from the same period in 2012. Net profits jumped 28.7 percent in the first three quarters from last year.

Tsingtao’s stock price at A shares and H shares also hit record highs, according to the company’s Q3 financial report for 2013.

Alibaba’s ‘Leftover Treasure’ hits 43 mln users

Yu’ebao (Leftover Treasure). an Alibaba personal finance product, had 43.03 million users with aggregate deposits of 185.3 billion yuan (30.4 billion U.S. dollars) at the end of 2013.

Yu’ebao is an online fund established by Alipay, China’s largest third-party payment platform and subsidiary of Alibaba, part of China’s biggest online shopping mall, togetheer with the private Tianhong Fund.

“Investments” in the fund have brought 1.79 billion yuan in profits to users since its launch in June 13 this year, according Alipay on Wednesday.

Yu’erbao allows Alipay customers to invest any balance in thier accounts with the Tianhong Fund and has already become the largest fund of its kind in China.

Its users come from all over China: more than 2,000 counties and cities in 31 provincial-level administrative regions with an average deposit of 4,307 yuan per user.

Philips opens lighting center in Chengdu

Philips has officially opened its center for the development and production of advanced lighting technologies in Chengdu, providing it with a second regional base of operations in China.

The Philips LED Lighting Demonstration Park was opened in the Chengdu Hi-Tech Development Zone in the Sichuan provincial capital city, with the formal opening ceremony taking place on Dec 20.

Covering an area of about 40,000 square meters and with an investment of about $34 million, the park includes a manufacturing center for LED lights and a lighting application center.

The manufacturing center will mostly produce professional outdoor and indoor lights and be focused on providing local and global customers with highly customized lighting solutions.

The lighting application center covers 7,000 square meters and boasts Philips’ most advanced lighting technologies and solutions.

It is modeled on “a mini smart city”, exhibiting the effects of lighting through real-life scenarios, both outdoor and indoor. It recreates urban environments such as the home, office, hotel, supermarket, clothing store, street and urban landscape.

All lighting systems in the center can be smartly controlled and managed with an advanced lighting control system, with the aim of simultaneously achieving optimal visual effects and energy efficiency.

“The park reflects our commitment to Chengdu as the second regional headquarters of Philips in China. It is also a part of the execution of our ‘home market’ strategy — establishing China as one of the key innovation and operation hubs for Philips’ global value creation,” said Patrick Kung, CEO of Philips Greater China, at the opening ceremony.

In June 2011, Philips signed a memorandum of understanding for strategic cooperation with the Chengdu Hi-Tech Development Zone management committee, agreeing the establishment of the company’s second regional headquarters in Chengdu.

The company’s aim was partly to extend its operations further into central and western China, part of a plan to implement a localization strategy in China, including the deployment of talent and the creation of marketing channels.

In 2011, when the deal was signed, Yuan Zongyong, deputy director of the Chengdu High-Tech Development Zone’s management committee, praised the decision to establish an operations center in Chengdu.

“Against the backdrop of China’s Go-West Strategy and global industrial restructuring, the Chengdu High-Tech Development Zone is attracting increasingly more internationally famous companies with its advantage in technology, skilled workers, its regional position, market, transportation and costs,” Yuan said.

Philips, which has its international headquarters in the Netherlands, opened its first regional headquarters in China in Hong Kong, but later moved operations to Shanghai.

Shenzhen to Hike Minimum Wage Levels

Shenzhen human resource officials announced last week that the city will raise its monthly minimum wage level by 13 percent to RMB1,808 from February 1, 2014, while its hourly minimum wage will be adjusted from RMB14.5 to RMB16.5.
The new minimum wage standards are expected to benefit about 936,000 workers in Shenzhen, according to the city’s human resources and social security bureau.
In China, local governments are required to raise their minimum wage levels at least once every two years as a matter of State policy. Shenzhen last updated its minimum wage levels in March 2013, raising the monthly minimum pay by RMB100 to RMB1,600.
In 2013, twenty-seven regions in China have adjusted their minimum wage levels including: Shenzhen, Shanghai, Guangdong, Xinjiang, Tianjin, Jiangsu, Zhejiang, Beijing, Shandong, Fujian, Jilin, Liaoning, Hubei, Ningxia, Shanxi, Yunan, Anhui, Henan, Jiangxi, Guangxi, Gansu, Sichuan, Shaanxi and Guizhou. Detailed information can be found in the chart below.

After the latest round of adjustments come into effect, Shenzhen will have the highest minimum wage in the country at RMB1,808, followed by Shanghai at RMB1,620. Shenzhen will also have the nation’s highest hourly wage rate at RMB16.5, followed by Beijing and Xinjiang at RMB 15.2.
The country’s Employment Promotion Plan provides that the minimum wage levels in China should grow by at least 13 percent annually through 2015, and the minimum wage levels in most areas should not be lower than 40 percent of the average local salary. Under such policies, minimum wage levels across the country have registered an average 12.6 percent annual growth rate from 2008-2012.
Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States.
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