Archives 2018

China embraces new opportunities in offline retail despite e-commerce development

China’s offline retail is embracing new opportunities as e-commerce is presenting innovative consumption experiences for the country, said People’s Daily in a Monday report.

According to recent statistics released by China’s Ministry of Commerce (MOFCOM), the sales of 2,700 key typical retail enterprises rose by 4.6% year on year in 2017, 3 percentage points higher than that of last year over the same period.

Convenience stores are a miniature that shows signs of the recovery of the retail industry. The overall business index of China’s convenience stores was 71.28 in the fourth quarter of 2017, 2.03 higher than that in the third quarter, said a report issued by the MOFCOM.

The statistics of different businesses of typical retail enterprises showed that in 2017, the sales of specialty stores, pro-stores, supermarkets, and department stores increased by 8.3%, 6.2%, 3.8%, and 2.4%, respectively, 6.6, 3.3, 1.9, and 2.7 percentage points higher respectively than those of the first half of this year over the same period of time.

Online and offline retail have always been considered rivals to each other. Some people even attributed the previous fall of market share of the real economy to the diversion of e-commerce.

“Online and offline competition is not a ‘win and die’ situation, and ‘survival of the fittest’ is the only market law,” said Li Keaobo, Executive Secretary General of Center for China in the World Economy under Tsinghua University.

After timely adjustment, offline retail still has the opportunity to win the market share because of its unique advantages in meeting consumers’ demand.

The narrowing gap between online and offline prices is the primary reason for the recovery of offline business. “Now the prices offered at online platforms and department stores are almost the same,” said a consumer named Cai Wei, adding that he prefers the latter since it features more credibility.

“China’s online and offline retail are experiencing integration and common development,” noted Ren Guoqiang, senior partner of the global strategy consulting firm Roland Berger. More Chinese retail enterprises have realized that innovation, enhanced operating capability, and the upgrading of consumer experiences are the only way of development, he said.

“But we still have to further improve the business environment for retail industry,” said Li. According to him, the online-offline integration calls for a fair and orderly competition environment.

Currently, online retail sales account for 15% of the total retail revenue in China, and a well-built monitoring system would better guide the direction for its future development.

China’s Hainan cuts red tape to attract foreign investment

Denis Koreshkov waited only one night before getting his business license in south China’s Hainan Province.

The 34-year-old Russian engineer and his business partners were amazed at the administrative efficiency. The office of his company in Hainan Software Park in Chengmai County, which is undergoing fitment and equipment installation, will be put into use after Spring Festival, which falls on Feb. 16.

Koreshkov and his partners moved their computer technology company from Russia to Hainan last year and established the Hainan firm with a registered investment of 10 million U.S. dollars.

“China is a rising power in the IT industry and has a huge potential market,” he said. His company has signed three cooperation projects in Hainan.

The Russian entrepreneur is among foreign investors benefiting from the favorable business environment in China.

The country has been making efforts to remove barriers to market access and requires local governments to create healthy business environment for fair competition.

To attract foreign investors, since October last year the approval of foreign enterprises in Hainan has only taken three days, compared with 18 days previously.

Hainan took the lead on online administrative approval in July 2017, enabling applicants to submit administrative approval affairs at home with a computer.

“A highly efficient government will cut the institutional and time costs for companies’ development,” said Wang Jing, head of the Hainan provincial government affairs service center.

“Streamlining administrative approval procedures will push the transformation of government functions and create a favorable soft environment for economic development,” she said.

Wu Yusheng, founder of Tetranov International, a U.S. pharmaceutical company, also feels the benefits of such policies.

The registration and construction of his health product plant in Haikou, the provincial capital, only took five months.

“We have lots of investment projects around the world. The Hainan project is the fastest,” Wu said.

To attract foreign capital, Hainan also identified 12 key industries, including tourism, Internet, medical treatment and bio-pharmaceuticals, and introduced preferential policies.

Due to the policies, the island province has become a hot spot for foreign investment.

In the past five years, 360 foreign-funded enterprises have been set up in the province, with contracted foreign capital reaching 25.4 billion U.S. dollars. In 2017, the island signed almost 40 foreign investment projects.

Traditional retailers fight to maintain market share

People select food products imported from Britain at an Ito Yokado department store in Beijing.

In their competition with online giants, which have recently expanded to offering fresh food in physical stores, traditional brick-and-mortar retailers are gearing up to secure their market shares in this sector.

Sam’s Club, the membership store and high-end format of one of the world’s largest retailers by revenue Wal-Mart Stores Inc, has decided to set up “club depots”, or storehouses, with Dada-JD Daojia, a food-delivery unit of the country’s second largest e-commerce platform JD, at places where their physical stores have not yet reached.

The system will be built together by Sam’s Club and Dada, including selecting locations for the storehouses, managing the inventory and deliveries.

Each storehouse will cover about 1,000 merchandise items, mostly high-frequency fresh groceries. That category currently takes up 20 percent of the Sam’s Club stores’ revenue. Every storehouse will cover a neighborhood market of three to five kilo-meters, offering delivery within one hour.

Chen Zhiyu, Walmart China vice-president, said since the testing of two club depots in Shenzhen, the delivery time has been shortened to 40 minutes on average, with orders quickly raised to 200 a day and repeating orders to 30 percent.

“We’ve often heard that despite consumer’s preference in products at Sam’s Club, they are often restrained by the long distance to the store or large packages of each item,” said Chen, who is also in charge of Sam’s Club’s e-commerce and marketing and membership.

“The new storehouse will increase customer’s shopping frequency and loyalty by satisfying their needs for convenience, especially for fresh goods,” he said.

Chen, who held several positions at Alibaba Group Holding Ltd prior to his current role, said Sam’s Club expects to increase its online sales to as much as the level of its physical stores within three years.

Sam’s Club’s digital services have seen three-digit annual growth in recent years.

French leading retailer Carrefour SA is also planning to expand its digital and online reach to 18 cities in China from the current 12. The six new cities include Guangzhou, Dongguan, Haikou, Changsha, Hefei and Dalian.

Carrefour has built its own shopping application and its stores have worked with online-to-offline delivery platforms including Metian, Ele.com and Baidu Waimai. Meanwhile, in Beijing and Shanghai, Carrefour has started to sell fresh goods directly from overseas, with a special focus on lobsters and oysters.

Meanwhile, traditional department store Ito Yokado has initiated upgrades on its remaining Yayuncun store after closing its seven other stores in Beijing.

The revamping efforts include expanding its food supermarkets, introducing catering, entertainment and education businesses and gyms, which cover nearly half of the total area, while the general merchandise area will be downsized.

Founded in 2002, the Yanyuncun store of Ito Yokado has an operating area of 21,200 square meters. The new store will set up a central kitchen to offer processed foods and half-processed food for consumers.

Fresh merchandise has also been upgraded to meet the demands for high-end products. Imported beef from Australia, food from Japan and packaged processed food for neighboring working families are now also available.

Game developers, designers among highest paying jobs: report

Game developers at Perfect World, a Beijing-based game company

Consider playing video games is simply a waste of time and money? You may need to think again.

Those thousands of hours spent playing video games, especially if supplemented with a degree in game development and design, can now lead to a career in the video game industry with a very competitive salary.

Game developers and designers are earning the highest salary among almost all professionals in the cultural and creative industry, with a median salary of over 10,000 yuan (U.S.$1562.5) a month in China, according to a report released by the Beijing-based market consultancy CNG.

Its chief analyst Wang Xu explained this could be attributed partly to rapid industry development and to the high demand for talents.

China’s game market has become the world’s largest, with sales revenue rising from some 10 billion yuan in 2007 to 203.6 billion yuan in 2017, a nearly 20-fold jump in a decade, according to China Gaming Report.

Despite the rapid development, the country still faces a lack of skilled professionals in the industry. Survey analysis shows the gaming market still need over a million game designers to match its rapid development.

Although a high diploma is not a must in the career, big game companies still prefer college graduates with hands-on experience and vocational skills in game development and designing, CNG reported.

Due to course design and lack of interaction with the industry, however, universities usually are not producing the kind of graduates suited to industry demand, said Guo Lei, executive dean of the Pixseed Digital Art Education Base, a talent incubator focusing on digital art fields such as games, comics and animation.

“We want to work with top universities at home and abroad as well as leading companies in course designing and work orientation, so as to cultivate more talents fitting the industrial demand,” she added.

China’s economy accelerates for 1st time in 7 years

China’s economy expanded 6.9 percent in 2017, picking up pace for the first time in seven years.

GDP totaled 82.7 trillion yuan (about 13 trillion U.S. dollars) in 2017, up from around 41.3 trillion yuan in 2010, when China first overtook Japan.

But it’s not only the speed or quantity of growth that may make China a sustained engine for global economic growth. With policymakers reiterating the importance of “high quality growth,” China’s economy is entering a new era.

BEATING FORECAST

“Major macroeconomic indicators all beat market expectations, pointing to economic stabilization,” said Ning Jizhe, head of the National Bureau of Statistics (NBS).

While exceeding market consensus of around 6.8 percent, the 6.9-percent growth rate in 2017 was also well above the official target of around 6.5 percent, and 6.7 percent in 2016.

Wang Hanfeng, an analyst with China International Capital Corporation, said that the pick-up signaled that China’s economy has entered a new phase of development.

“The acceleration added to evidence that the economy passed a turning point in 2016 and continued upward on the back of industrial and consumption upgrades,” Wang said.

Growth in the fourth quarter came in at 6.8 percent, unchanged from the rate seen in the third quarter, NBS data showed.

The Q4 data was driven by a robust expansion of the service sector, as it continued to benefit from China’s economic rebalancing, Nomura said in a research note.

“Given these stronger-than-expected Q4 GDP data, we have decided to raise our 2018 growth forecast by 0.1 percentage point to 6.5 percent,” it said.

BETTER STRUCTURE

The new era’s basic feature is a shift from high-speed growth to high-quality development, according to a statement issued after the Central Economic Work Conference in December.

A breakdown of economic data Thursday showed a better economic structure, with new growth drivers emerging and outdated capacity fading.

New-energy vehicles, industrial robots, solar power and integrated circuit outshone most other industries in terms of output, growing 51.1 percent, 68.1 percent, 38 percent and 18.2 percent, respectively, year on year, contributing to a pick-up in industrial output growth in 2017.

On the other hand, mining and cement sectors saw their output decline 1.5 percent and 0.2 percent, while the textile and coal industries only grew 4 percent and 3.2 percent.

“New growth drivers are increasingly important for the economy, contributing more than 30 percent of growth and 70 percent of new jobs,” said Tang Jianwei, an analyst with the Bank of Communications.

Bright spots such as retail sales in rural areas create future growth potential, analysts said.

The private sector is also showing vitality as the government pushes market reforms and improves business environment.

Private investment reached 38.15 trillion yuan, up 6 percent year on year, 2.8 percentage points faster than the previous year, accounting for 60.4 percent of the total investment.

HARD-WON RESULT

The growth came despite government measures to contain risk, which should have dampened growth.

Data Thursday showed a delicate balance between defusing risks and maintaining growth.

In 2017, stricter rules were adopted to curb pollution, local government debt, housing speculation and financial irregularities. All these “reductions” add up to a more sustainable growth model.

“The fact that the economy rebounded despite pollution controls and deleveraging showed that the real economy is improving, leaving room for risk control in 2018,” said Liu Dongliang, an analyst with China Merchants Bank.

Chinese authorities said the country would continue to seek solid progress in preventing major risks, targeted poverty alleviation and pollution control in 2018, or the so-called “three tough battles.”

When asked if such battles would weigh on growth in 2018, Ning hinted that he would not worry too much.

“When we talk about keeping the economy running within a proper range, we should not only look at the growth pace but also employment, income growth and improvement in the environment. After all, that’s what economic development really means,” Ning said.

China’s catering industry revenue to reach nearly 4 trillion RMB in 2017

Revenue of China’s catering industry in 2017 is expected to reach 3.9 trillion RMB ($607 billion), according to a report by China’s Cuisine Association (CCA) on the country’s food consumption.

The revenue stood at 3.23 and 3.58 trillion RMB in 2015 and 2016, respectively. The continuous rise of the figure indicates the industry’s growing impact on the general consumption market.

CCA President Jiang Junxian noted that the growth of China’s catering industry has been maintained within a reasonable range, predicting revenue of over 5 trillion RMB in 2020.

According to the report, dining environment was selected by 19.2% of the consumers as the most important factor that influenced their choices of restaurants. A total of 17.8% of them considered taste as the most important.

Chinese cuisines took 57% of the catering market, possessing a dominant position. The figure was 55% in mega cities and 63% in small- and medium-sized ones.

A total of 92% of the people born between 1970 and 1979 marked Chinese food as their priority, while the proportion was only 19% among those born in the 1990s.

Hotpot was the most favored food of Chinese consumers in 2017, for which food safety, price, and environment were all criteria for their choices, especially those born between 1980 and 1989.

In addition to the dominant Chinese cuisines, snacks were another major contributor to catering industry growth in 2017, accounting for 16% of the sector. The proportion was even 18% in major cities.

CCA statistics indicate that salty taste was the most popular among Chinese consumers in 2017, favored by 23.3% of them. Spicy food ranked second, with a percentage of 17.2%.

China’s mobile games market posts $15b revenue in 2017

Mobile games revenue in the Chinese market in 2017 reached $14.6 billion, beating the United States market, which recorded $7.7 billion revenue, CBN Daily reported Friday, citing a whitepaper released on the China Digital Entertainment Industry Annual Summit.

China’s gaming industry leader Tencent saw its online games revenue in the third quarter of 2017 grow by 48 percent to 26.8 billion yuan ($4.14 billion), which reflected contributions from smartphone games, including existing titles such as Honour of Kings, and new titles such as the China version of Contra Return and Legacy TLBB Mobile, according to the tech giant’s website.

Another major play NetEase reported a net revenue of 8.11 billion yuan in the third quarter, up by 23.5 percent year-on-year, according to tech.163.com, NetEase’s online news portal.

Japan and South Korea followed with a revenue of $6.51 billion and $2.07 billion respectively, according to the whitepaper.

Mobile games revenue reached $46.1 billion worldwide, up by 12.5 percent year-on-year. The North American region saw a revenue of $82.6 billion year-on-year, up by 5 percent, while the Asia-Pacific recorded a revenue of $27.54 billion year-on-year, up by 13 percent.

The fastest growing region was the Middle East and African market, which saw $2.32 billion yuan in revenue, up by 46 percent. The second-fastest growing market was the Latin American, which saw a revenue of $1.71 billion, up by 24 percent.

China’s producer prices dip in December

China’s producer price inflation eased in December on government restrictions for polluting industries, official data showed Wednesday.

The producer price index (PPI), which measures costs for goods at the factory gate, rose 4.9 percent year on year in December, said the National Bureau of Statistics (NBS).

It was down from growth of 5.8 percent recorded in November, according to the bureau. On a monthly basis, it was up 0.8 percent.

For the whole year of 2017, PPI climbed 6.3 percent from one year earlier, compared with a 1.4-percent drop in 2016, ending the declining trend for the past five years.

As northern China enters its winter heating season, the government has increased efforts to tackle smog, asking steel mills and smelters to halt production to curb pollution. Those measures cooled demand for industrial raw materials.

Compared with a month ago, factory-gate prices increased at a slower pace in oil and natural gas developers, while ferrous metal producers and the coal mining industry saw prices drop. Costs increased in gas production and supply industries, NBS senior statistician Sheng Guoqing noted.

Compared with a year ago, prices in oil and natural gas extraction increased by 20.1 percent, followed by 18.5 percent for ferrous metal smelting and 12.3 percent for oil processing.

The PPI figures came alongside the release of the consumer price index, which rose 1.8 percent year on year in December, up from November’s 1.7 percent.

China’s passenger vehicle sales up slightly in 2017

China’s passenger vehicle sales edged up slightly in 2017 and are expected to grow faster this year, according to an industrial association Tuesday.

About 24.2 million passenger vehicles were sold last year, up 1.5 percent year on year, according to the China Passenger Car Association (CPCA).

In December, about 2.8 million passenger cars were sold, up 0.6 percent year on year, while over 100,000 new energy vehicles were sold, marking a month-on-month increase for 11 months, CPCA data showed.

The association expected sales of passenger vehicles to pick up in 2018 to reach about 4 percent year-on-year growth.

China is the world’s largest auto market and also the fastest-growing market for new energy vehicles, thanks to the government’s preferential policies to boost clean energy use to curb pollution.

China’s services activity rises fastest in 4 years

New businesses gave a boost to China’s services activity which expanded in December by the quickest momentum in four years, a private report showed yesterday.

The Caixin China General Service PMI rose to 53.9 at the end of the year from 51.9 in November, according to the survey conducted by financial information service provider Markit and sponsored by Caixin Media.

It said the growth in services activity was due to a greater volume of new business.

The PMI showed services companies posted the strongest upturn in new orders since May 2015 as around 14 percent of monitored companies noted an increase.

Services companies continued to increase their payroll numbers at the end of the year amid reports of rising business requirements.

Released on Wednesday, the Caixin manufacturing PMI rose to a four-month high of 51.5 for December from November’s 50.8 to confirm steady economic growth in 2017.

“The December readings of the Caixin PMI surveys point to improving economic sentiment,” said Zhong Zhengsheng, director of macroeconomic analysis at CEBM Group. “Expansion in total new orders and new export business revealed that manufacturers and service providers are optimistic over the business outlook for 2018.”

Meanwhile, the official non-manufacturing PMI released last week edged up to 55 for December from 54.8 in November.

The official non-manufacturing PMI survey covers 4,000 large and small companies, while the Caixin service PMI measures over 400.

The services sector contributed to more than half of China’s gross domestic product in recent years as the country is in the midst of transforming its economy from investment-driven to consumption-driven.

The Bank of Communications wrote in a report yesterday that China’s GDP may have grown 6.8 percent in 2017, above the government target of 6.5 percent.

The bank’s economists expect GDP this year to dip to 6.7 percent, with growth of tertiary industries continuing to outpace the industrial sector.