Archives January 2014

First-tier cities draw capital into offices

First-tier cities, led by Beijing and Shanghai, remain preferred sites for office investment in China despite rather low net yields, CBRE concluded after tracking 15 major Chinese cities.

Boasting stable returns with a low level of risk, underpinned by a well-developed market and resilient demand from foreign and domestic clients, first-tier cities rank higher in CBRE’s MarketScore system, a strategic framework to evaluate real estate investment potential according to their risks and returns.

The key challenge for most first-tier cities, however, is aggressive pricing as net yields for office investments in these cities range from 4 percent to 5 percent.

“As economic and social development varies significantly across different Chinese cities, it can be challenging for investors to choose where to invest and where to buy,” said Frank Chen, executive director and head of CBRE Research China. “The scoring exercise aims to identify the most attractive real estate market from an investor perspective, based on fundamental drivers.”

Beijing topped the MarketScore ranking due to its strong historical rental performance, low vacancy rate and limited future supply.

Shanghai was second due to a strong net take-up and the highest investment liquidity.

Wuhan was third although abundant future supply will curb rental growth in the near term, CBRE said.

Huawei’s revenue set to rise 10 pct annually over 5 years

Huawei Technologies expects revenue to grow 10 percent annually over the next five years as it taps the booming consumer, enterprise and software business as well as reap the benefits of its huge investment in research and development.

Its revenue in 2013 may hit 238-240 billion yuan (US$39.4-39.7 billion), a year-on-year growth of 8-9 percent, the Shenzhen-based company said yesterday.

Profit may reach 28.6-29.4 billion yuan last year, up 40 percent from the previous year, Chief Financial Officer Cathy Meng said in Beijing.

All the financial figures were unaudited.

Meng also predicted a 10 percent annual rise in Huawei’s revenue over the next five years.

The country’s No. 1 telecommunication equipment maker invested 33 billion yuan in research and development in 2013, up 9.6 percent from a year earlier.

It plans to invest US$600 million on 5G technology by 2016, according to Meng.

Huawei said in October that it planned to invest US$2 billion in Britain within five years.

In the global telecom equipment market, Huawei ranks second after Ericsson.

WB projects global economy to grow 3.2 pct in 2014

The global economy is estimated to expand at 3.2 percent this year from 2.4 percent in 2013, with growth picking up in developing countries and high-income economies, the World Bank said Tuesday.

But growth prospects remain vulnerable to U.S.tapering, the global lender said in its semi-annual Global Economic Prospects report.

The firming of growth in developing countries is being bolstered by an acceleration in high-income countries and continued strong growth in China, it said.

However, global growth outlook will be sensitive to headwinds from rising global interest rates and potential volatility in capital flows, as the U.S. Federal Reserve begins withdrawing its massive monetary stimulus, the report noted.

Growth in developing countries will pick up from 4.8 percent in 2013 to a slower-than-expected 5.3 percent this year, reflecting a cooling off of the unsustainable turbo-charged pre-crisis growth.

For high-income economies, the drag on growth from fiscal consolidation and policy uncertainty will ease, helping to boost economic growth from 1.3 percent in 2013 to 2.2 percent this year.

Among them, the recovery is most advanced in the United States, as it is projected to grow by 2.8 percent this year after expanding for ten quarters.

The Euro Area, after two years of contraction, is projected to grow by 1.1 percent this year board.

Expats in top demand for Chinese state-owned enterprises

There has been a significant increase in the demand for foreign professionals to represent Chinese state-owned enterprises abroad as the nation gears up its global commercial activities and plans listings of its domestic companies on international bourses.

Robert Parkinson, founder and CEO of RMG Selection, an international recruitment firm with offices in the China, says that the job market started picking up in the second half of 2013, and ended the year with strong indications of good hiring activity continuing into 2014 on the back of growing optimism and confidence. One the areas that is seen robust recruiting is for foreigners who can represent Chinese interests abroad, and have specific knowledge of capital markets and listings regimes.

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RMG recently published the results of a survey of the China job market, done in conjunction with academics from the University of Nottingham. The research report, 2013 China Talent-flow Survey Report 2, tracked several trends such as the rate of ‘job-hopping’ in various industries, including financial services and professional services.

Of the 4,000 participants in the survey, more than a quarter had changed jobs in the previous 12 months compared to about a fifth in the previous survey period (end 2012/early 2013). Parkinson says candidates demand – and get – increases varying from 20% to 50% each time they move.

Most of the ‘job-hopping’ activity was concentrated among candidates who earned 50,000 RMB (over US$8,000 per month), while the age demographic most likely to change jobs was the so-called “millennials” – candidates born in the early 1990s – with 43% reporting they had changed employer in 2013.

“Many Chinese graduates will take pretty much any job they can find because the job market is so competitive. But once they have settled, and a better offer comes along, they will move quickly.”

RMG is seeing a flood of ethnic Chinese to China – either nationals who have worked abroad moving home, or people with Chinese ancestry and family connections wanting to seek opportunities in what Parkinson described as a very ‘hot’ market.

But Chinese companies were also seeking out foreigners who could represent their interests abroad – especially people with a strong understanding of and experience in international capital markets – skills that many Chinese nationals currently lack due to the country’s historically closed economy.

But for expats, finding a job in China and even looking for another role when already working in the country is challenging. Many channels available to finance professionals in other parts of the world, such as company recruitment portals, job boards, newspaper listings, and internet sites are practically non-existent.

One of the reasons, says Parkinson, is cultural. “Candidates, especially senior people, regard it as beneath them to look for jobs – they expect employers and headhunters to come to them.”

This supports one of the key findings for the research: that using headhunters is still the preferred channel for Chinese companies to find candidates. In the recent survey, the researchers found that the percentage of Chinese companies using headhunters had increased from 35% to 57% in the past year.

Lenovo challenges Apple, Samsung

Yang Yuanqing was never afraid of declaring war on the strongest enemies.

After beating Hewlett-Packard Co to take the No 1 position in the global personal computer industry, Yang, the chairman and CEO of Lenovo Group Ltd, can’t wait to challenge Apple Inc and Samsung Electronics Co Ltd.

“Traditional PC vendors are no longer our top rivals nowadays,” said the engineer-turned-executive. “Our next step is to challenge Apple and Samsung in the portable consumer electronics sector.”

Over the past five years, Lenovo eroded other PC manufacturers’ market share bit by bit, reaching the top position in China first and then in the rest of the world. Yang is determined to copy this strategy on a new battleground.

The biggest campaigns Lenovo launched in 2013 were for its smartphone and tablet series.

The Beijing-based company invited basketball sensation Kobe Bryant and Hollywood star Ashton Kutcher to endorse its high-end smartphone and tablet products in a bid to lure young Chinese buyers.

The company came out with most of its flagship gadgets just before Apple unveiled its iPhone 5S and iPad Air devices.

Lenovo has sold 1 million Yoga-branded tablets since the product’s launch in October, according to Yang, who also plans to bring Lenovo’s consumer electronics to developed markets such as the United Kingdom and the United States.

The company sees the smartphone market as a stepping stone to enter other mobile consumer electronics markets because of its popularity in both emerging and developed markets.

According to a Gartner report, Lenovo was the world’s third-largest smartphone manufacturer in terms of market share as of the third quarter of 2013.

The company sold nearly 13 million smartphones around the world, taking more than 5 percent of global market share.

Yet the Chinese company still lags far behind Apple and Samsung in terms of shipments.

Asia-Pacific markets are poised to post huge increases in smartphone sales as more buyers abandon feature phones for lower-end smartphones.

“Consumers in China and Latin America are rushing to replace their old models with smartphones,” said Anshul Gupta, principal research analyst at Gartner.

About 48 percent of Chinese mobile phone owners will use a smartphone by the end of 2014, Forrester Research Inc estimated. The figure is expected to increase to 64 percent by 2017.

In China, Lenovo is the second-largest vendor after Samsung, according to local research firm Analysys International.

Among the 93 million smartphones sold in the third quarter, Lenovo controlled 11.4 percent of market share, while Samsung had 18.1 percent.

Liu Jun, vice-president of Lenovo, said the company is eyeing an even bigger market share outside China.

Lenovo sees the rise of emerging markets as a golden opportunity for its business in the post-PC era. It’s quickly expanding operations in Southeast Asian nations including Malaysia, Indonesia and Singapore.

Antonio Wang, associate director at industry consultancy IDC China, said that Lenovo’s advances were mostly made via overseas M&A deals at the beginning of 2013.

“The company was able to use its own research and successful marketing strategy in the mobile devices sector to create huge profits later on,” Wang said.

Yang, Lenovo’s CEO, recently announced the opening of a brand-new assembly plant in Wuhan, Hubei province.

Located in the southeast part of the city, the factory is the world’s largest manufacturing facility for Lenovo and a hub for the company’s mobile product line, Yang said.

It will build more than 30 million smartphones and tablets in 2014, representing 40 percent of the company’s total output in the mobile sector.

The plant will also recruit another 4,000 employees this year and will ship out more than 100 million mobile devices once put into full operation.

“We will largely rely on our own plants to feed global demand for mobile devices,” said Liu, Lenovo’s vice-president.

Unlike Apple, which outsources its production, Lenovo makes nearly 70 percent of its mobile devices itself.

“The company plans to turn the Wuhan plant into the world’s largest facility for developing, testing and manufacturing mobile devices,” Liu said.

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.