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Flat demand in U.S. starts to hit firms in China

Lei Shengzu, manager of China Textiles (Shenzhen) Co, does not mince his words about the future.

“The outlook for the United States textile and apparel market remains clouded by poor visibility,” he said.

Lei visited shopping malls and retail stores when he was in New York recently for a three-day international textile and apparel sourcing show at the Jacob K. Javits Convention Center.

“There are few people buying clothes by piles, which, however, was common before the global financial crisis,” he said. “Consumer habits have changed since the start of the crisis in 2007.”

Last year, the US imported $467 billion worth of goods from China, compared with $440 billion in 2013, according to the US Census Bureau. But through May 2015, imports from China have averaged $37.1 billion a month, which would project to a yearly total of $445 billion.

Textile and apparel imports from China have remained flat after some sizable percentage gains from 2000 to 2009. According to the Office of Textiles and Apparel in the US Department of Commerce, total textile and apparel imports were $41.8 billion in 2014, compared with $41.7 billion in 2013, a rise of only 1.49 percent.

Tepid consumer spending is also echoed by the US GDP report for the first quarter of this year. It showed consumers ratcheted back spending, a key factor in slowing economic growth.

Personal consumption expenditures rose at a downwardly revised 1.8 percent rate from January through March. Spending on services climbed 2.5 percent, but purchases of goods rose 0.5 percent. By contrast, consumer spending was up 4.4 percent in the final quarter of last year.

US GDP contracted at a 0.7 percent seasonally adjusted annual rate in the first quarter, from an initial estimate of 0.2 percent, according to Commerce Department data released in May.

The US Federal Reserve is forecasting growth of 2.5 percent for the next two years, only marginally above the tepid rates from the start of the recovery.

The Financial Times reported after years of virtually no income growth, Main Street is unprepared for positive price fluctuations. Consumers have opted to pocket the recent gains from lower gasoline prices rather than spend them.

Lei said that as the economy becomes increasingly globalized, the ongoing recession in the eurozone is likely to put a dent in the US economic recovery. Lei said he believes the market needs at least two or three years to rebound. Industry insiders have realized that it is harder in the US to find buyers for high-priced, high-end fabrics and products.

“And US buyers tend to be more picky and sensitive in price,” said Deng Zhijuan, an official from Shanghai-based High Fashion Textile and Manufacturing Co.

“Big deals are also hard to make. Many buyers are just (looking) for some small quantity shipments. They are either independent designers or online retailers.”

Still, there are some bright spots. Zhu Jing, manager of Ningbo Aoqi Technological Knitting Co, said that although the bids are lower, there is still some profit margin.

“As the Chinese market has been open for decades, it has fostered a wealth of potential buyers and business partners who are willing to do businesses with China,” he said.

Sinopec denies unit is reducing staff overseas

China Petrochemical Corp (Sinopec) said on Wednesday that one of its international units had withdrawn 263 Chinese employees from overseas markets since 2014 so that it could take full advantage of local labor resources.

Lü Dapeng, a spokesman for Sinopec, told the Global Times that the employees were recalled to China by Sinopec International Petroleum Exploration and Production Corp (SIPEPC), a wholly owned subsidiary of Sinopec that is responsible for overseas projects.

“The withdrawal is a normal staff rotation to optimize human resources,” Lü said, adding that the move also allowed the company to improve its management capacity and operating efficiency.

Lü’s comments amounted to a denial of reports about large-scale layoffs in overseas markets.

Media outlets have reported recently that Sinopec is restructuring its overseas assets and planning to recall 40 percent of its overseas staff in order to reduce costs.

At SIPEPC, “80 percent of the total employees are local people and about 700 employees are Chinese,” said Lü, noting that Sinopec’s overall overseas divisions have 51,000 employees from various countries and regions.

Analysts and media commentators have attributed the recalls to cost reductions that were made necessary by the slumping global oil and gas sectors.

Energy giants including Royal Dutch Shell Plc, BP Plc, Exxon Mobil Corp and Chevron Corp all recently lowered their revenue forecasts for this year and made large investment cutbacks.

There have been many problems surrounding SIPEPC’s overseas acquisitions from 2001 to 2014, such as irregular acquisition procedures, procurement prices that far exceeded the actual values of the assets and irregular consulting fees, financial news website caixin.com reported on Wednesday, citing an internal report of SIPEPC.

Many of SIPEPC’s projects in Australia, Syria and Brazil had performed below the expectations that prevailed at the time of purchase, the report said.

The report also said that Sinopec ordered SIPEPC to stop investing in worthless overseas assets and avoid more investment losses.

Young women active in financial management, says report

Young Chinese women are more active in financial management than their male counterparts and are more willing to take investment risks, said a recent report.

The report, published by Talicai.com, a website launched in 2012 to provide financial management services for women, based its findings on responses from thousands of urban women aged between 22 and 45 via online questionnaires, telephone and face-to-face interviews. The specific sample of the survey is not available.

The survey found that Chinese women are not afraid of investment risks, and the younger they are, the more active they are in investments. About one-third of the respondents were stock investors, while about 60 percent were also investors in equity funds.

“Most of the young women born after 1985 made significant investments this year. They hold a speculative attitude and have been active participants in the recent capital market rally,” said Hua Lei, an account manager with Shenzhen-based Guosen Securities Co.

“An interesting aspect of the recent rally was that, the younger female investors were more active than their middle-aged peers in market-related activities. Not only were they adventurous, but more willing to make risky bets. They are bold investors because they have not experienced any significant losses,” said Hua.

Besides, a significant number of the respondents, especially those aged below 30, expressed concerns about investing in precious metals and in online peer-to-peer financing.

Middle-class families tend to manage their growing wealth more rationally. Nevertheless, they still face significant investment challenges and uncertainties.

The survey collected data from women whose average annual income was 78,500 yuan ($12,640) and had investable assets of about 105,000 yuan. Yet another finding from the survey was that most of the middle-income women, who made financial investments, use about 30 to 50 percent of their annual income for such purposes.

The report said that women born after 1990 were more active and open to financial products than those born in the 1980s. Women born after 1990, on average, make their first savings of roughly about 100,000 yuan by the age of 26.4. That is 2.8 years earlier than those born after 1980.

In addition, about 5 percent of those born after 1990 have financing experience of more than five years, and 8.2 percent of them own at least one property.

Bian Wenyue, a 24-year-old who has just come back after studying in the United Kingdom and works as an engineering consultant, is one of the many who opened a stock trading account in January, hoping to ride the rally.

“I have just started working, and my income is not that high. I hope to make some extra money by investing in stocks. It is really exciting to dabble in stocks, despite the fact that some of my money is still trapped in the market. Overall, I did make some gains,” she said.

“I also set aside some money to invest in funds, as they offer more stable returns despite less yields. I also spent a small amount of money on buying some online fixed-income products.”

According to the report, when making an investment decision, women are willing to listen to their family members, but they still prefer to make the final decisions themselves, and have confidence in their decision-making capabilities.

At the same time, Chinese women are conscious about their personal growth. They spend one-quarter of their income on learning languages, higher studies and on travel.

Looking ahead, most of these young women are expected to have average investable assets of about 120,000 yuan in 2016, with average return rates of 10 percent, the report said.

China’s e-commerce trade over 16 trln yuan in 2014

Despite an anemic economy, China’s e-commerce trade soared in 2014 thanks to improved Internet infrastructure and an increase in cellphone users.

Transaction volume of Chinese shopping websites totaled 16.39 trillion yuan (2.68 trillion U.S. dollars) last year, up 59.4 percent year on year, data from the National Bureau of Statistics (NBS) showed on Monday.

Third-party platforms, like China’s largest shopping website Taobao.com, accounted for 44.3 percent, while self-operated stores 55.7 percent, data showed. The country’s 20 biggest online websites saw aggregate transactions worth 6.22 trillion yuan, making up around 90 percent of all third-party platforms.

Chinese businesses have turned to the Internet to offload stocked goods in a bid to cut costs and increase profits against economic headwinds, while price-sensitive consumers appreciate online shopping for its convenience and a variety of choices.

NBS official Sun Qingguo said the booming Internet, especially the pervasive mobile network, created an intimate bond between buyers and shopping websites and provided ample space for the development of e-commerce.

China boasted the world’s largest 4G network and 361 million online shoppers by the end of 2014.

Stellar growth in e-commerce has lifted online payment and logistics companies as well, Sun said. China overtook the United States to top the world in terms of the business volume in express delivery in 2014.

Sun predicts surging e-commerce will generate fresh consumption demand, prompt a new investment wave and encourage innovation and entrepreneurship across the country.

China considers limiting third-party online payments

China’s central bank has proposed limiting the size of transactions through third-party online payment systems like Alipay to ensure security for consumers’ information and money.

Under the proposal released for public consultation on Friday by the People’s Bank of China (PBOC), the amount shoppers would be able to spend through third-party online payment per day may be limited to between 1,000 yuan (163.5 U.S. dollars) and 5,000 yuan, depending on how sophisticated the system’s security checks are.

While platforms that have both digital certification and signature qualification checks will be exempt from the restrictions, the limit would be set at 1,000 yuan per day if the platform has only one qualification check.

If the system has two or more checks but they do not include digital certification and signature, the limit would be 5,000 yuan.

Where they are spending more than the sum allowed, consumers would be transferred to banking payment platforms to pay the surplus, according to the PBOC proposal.

Meanwhile, consumers whose accounts limit them to shopping payments will be allowed to spend no more than 100,000 yuan per year if the system is adopted. Those with more premium accounts that also allow for services like share purchases would be allowed to spend no more than 200,000 yuan per year.

The regulation is based on surveys of Chinese consumers’ average spending via third-party payment platforms last year, according to an unnamed source from the PBOC.

The draft guideline also bans third-party payment platforms from opening accounts for institutions running financial businesses such as online lending firms to avoid risks.

Sony lines up new games for Chinese gamers

Shuhei Yoshida, president of Sony’s Worldwide Studios for SCE introduces Project Morpheus HMD, the company’s latest virtual reality (VR) gear, during a press event held on July 29, 2015 in Shanghai.

A series of new games for Sony’s PlayStation 4, PS Vita and virtual reality device Project Morpheus debuted Wednesday at ChinaJoy 2015 in Shanghai.

More than 70 new games will be launched in the Chinese market for PS 4 video game consoles in the coming month, Sony announced.

ChinaJoy, or China Digital Entertainment Expo & Conference, is the largest gaming and digital entertainment exhibition held in the Chinese mainland.

Sony debuted its game console PlayStation 4 in 2013, and started selling the Chinese version on March 20 this year.

Priced at 2,899 yuan ($468) for the basic package and 3,299 yuan for a console plus a camera, the PlayStation Eye, the products are available at Sony Store, Tmall.com and JD.com.

It is the second foreign console allowed to enter the Chinese market after Microsoft launched its Xbox One in late September.

A new rule that allows both foreign and domestic gaming console makers to manufacture and sell their devices anywhere in the country was announced last week, according to a statement from the Ministry of Culture.

Due to government officials’ concern over objectionable content, China in 2000 banned gaming consoles via a moratorium. As a result, Microsoft, Nintendo and Sony, three of the world’s largest video game console makers, were shut out of China’s lucrative video game industry.

In 2014, the country limited foreign console makers to operations within the Shanghai Free Trade Zone (FTZ) in 2014.

Industrial insiders believe that such series of progressive policies could shake up the domestic gaming sector.

According to the working committee of China’s audiovisual, digital publishing and game publishing association, in 2014, the sales volume of China’s gaming market reached 114.48 billion yuan, up 37.7 percent year-on-year.

In the first half of 2015, the number reached 60.51 billion yuan, up 21.9 percent year-on-year. Since last year, overseas sales volume reached 1.76 billion yuan, reflecting a rapid growth of 121.4 percent.

A model poses with Project Morpheus HMD, Sony’s latest virtual reality (VR) gear, during a press event held on July 29, 2015 in Shanghai.

Project Morpheus head-mounted display (HMD)

Shuhei Yoshida, president of Sony’s Worldwide Studios, brought Project Morpheus HMD, the company’s latest virtual reality (VR) gear, to the press event to demonstrate their Chinese strategies.

VR, also known as computer-simulated life, first appeared in science fiction in the1950’s, and was developed for medical use, pilot simulation and military training in the 1990’s.

The entire industry began to draw the public’s attention as a developer kit named Oculus Rift, which was the first truly immersive VR headset for video games. It was initially mooted on the US crowd-funding platform Kickstarter by 9,522 backers who pledged more than $2 million.

Sony unveiled their bold VR gamble to the world at the Game Developers Conference in March 2014.

During the Electronic Entertainment Expo, or E3, held in Los Angeles this year, more than 20 demos designed for Project Morpheus were unveiled to the public.

“Summer Lesson”, “The Deep”, “The Playroom VR” and “Hatsune Miku Expo” will be demonstrated at the ChinaJoy PlayStation booth and visitors will have the chance to experience the Project Morpheus on the spot.

“Many people think that Project Morpheus is an accessory to PS4; the truth is that Project Morpheus is a new system, and both happen to work well together,” Yoshida said during a group interview after the press event.

“Project Morpheus is still at version one, Sony is trying its best to bring the product to the fans, we are testing internationally, to make sure the product is improving,” he said.

Sony announced at Game Developers Conference 2015 that Morpheus’ consumer VR headset is due to ship in Q1 2016.

Yoshida said that the global launch time will the same, but he didn’t give a specific date and he also mentioned that the device’s price has not been confirmed.

According to Yoshida, PC games can be migrated to Project Morpheus. He noted one example, saying that after refined and optimized the code, a user migrated Oculus games to Project Morpheus within just two days.

Sony London Studios’ Director Dave Ranyard, whose team is working heavily with the PS VR headset Project Morpheus, believes that VR HMDs could become the ‘technological icon of the age’, similar to Sony’s Walkman in the 1980’s and smartphones in today.

Lenovo leads salary list

Yang Yuanqing, CEO of Hong Kong-listed Chinese computer technology company Lenovo Group, topped the 2015 Chinese Hong Kong company CEO salary list released by Forbes China, the daily newspaper Beijing Times reported on Wednesday.

Yang was the richest CEO in 2014 with an annual salary of 119 million yuan ($19 million), putting him in first place for the third consecutive year, according to the report.

This year’s list included 334 CEOs of companies from the Chinese mainland that are listed in Hong Kong whose annual salaries exceeded 1 million yuan, up 107 from the previous ranking.

Forbes also released a 2015 Chinese A-share company CEO salary list, on which Ma Mingzhe, chairman of Ping An Insurance Co, was in first place with an annual salary of 109 million yuan.

China LinkedIn users top 10 million

The number of LinkedIn users in China has topped 10 million, a year and a half after the world’s largest professional network launched a Chinese version of its online services.

Founded in 2003 in the United States, LinkedIn has more than 300 million users. Before tapping into the Chinese market in February 2014, the company had just 4 million users from China, who registered on its global website.

LinkedIn China chief Derek Shen told reporters Tuesday that measures to boost its presence have included incorporating Twitter-like services Sina Weibo and Tencent Weibo into its platform and allowing users to bind their LinkedIn accounts with those on Chinese mobile app WeChat.

“We published more than 20 reports on the job market in China, which provided career advice for job-hunters,” Shen said. He added that helping companies like PC maker Lenovo and telecom equipment maker Huawei recruit talent also enhanced its influence.

LinkedIn hopes to further tap growth by launching a job-hunting application for Chinese graduates, many of whom are struggling as a record number of young people search for jobs amid a slowing economy.

Volkswagen China car sales hit by slowdown

China, the world’s biggest auto market currently in the throes of slowdown, has become a drag for Volkswagen, which had set a target to outsell Toyota, the world’s biggest carmaker by sales volume.

In the first half of this year, Volkswagen’s global deliveries shrank 0.5 percent from a year earlier to 5.04 million units as performance in China, its largest sales contributor, fell 3.9 percent to 1.74 million units, the company said yesterday.

That lagged the Chinese market’s 1 percent growth in general, which is itself in a dramatic slump from a compound average growth of 16.6 percent from 2005 to 2014.

A 48 percent surge in SUV sales in China was the only bright spot in the first half of this year. And with just one localized SUV in its Volkswagen brand’s portfolio here, the wheels of fortune have been on downward spiral for the company.

Sourcing about 30 percent of its sales from China, Volkswagen has a bigger risk exposure from the economic slowdown than its biggest rival Toyota, which accounts for only 10 percent of its sales in China.

Carmakers and dealers are trying to sail through the market downturn together. Volkswagen’s Audi brand has set aside a 1.2 billion yuan ($193 million) subsidy plan for its cash-tight dealerships.

Earlier this month, BMW announced up to 2 billion yuan reward package for sales achieved by dealers in the second quarter. That was on top of the 15 percent quarterly sales target reduction.

Price war looms as smartphone market booms

Domestic mobile phone makers demonstrate the selfie functions of their products at a smartphone expo in Nanjing, capital of Jiangsu province. Major Chinese players are gearing up for a price war in the high-end smartphone sector.

China’s big players are gearing up for a price war in the high-end smartphone sector, and the only big winner will be the consumer.

Xiaomi Corp, Huawei Technologies Co Ltd and ZTE Corp’s Nubia have all rolled out new products in what has been dubbed the “Godzilla” handset business, as they battle to wrestle away more market share from South Korean-based giant Samsung.

“By introducing premium devices, the average price of high-end smartphones will be dragged down,” Antonio Wang, an analyst with the United States-based market research company IDC in Beijing, said. “This will benefit consumers.”

It will also create more problems for Samsung, which has already been badly mauled by the aggressive tactics of China’s big three.

Earlier this month, the world’s largest smartphone manufacturer reported that its second quarter operating profit would probably fall by 4 percent to 6.9 trillion won ($6 billion) because of poor sales of its new Galaxy S6, particularly in China.

As the brand loses its mass appeal here, consumers are switching to cutting-edge domestic products from Xiaomi, Huawei and Nubia.

“Chinese smartphone companies are now more willing to invest in innovation by putting state-of-the-art technology into their devices,” Xiang Ligang, an independent analyst and founder of telecom website cctime.com, said.

“They know the ‘low performance for low price’ strategy does not work in today’s market. Cheap devices will never make big profit margins,” Xiang said.

The rise of China’s smartphone companies from low-cost labels to upmarket brands has been meteoric.

Xiaomi shipped out 34.7 million smartphones in the first half of this year compared to 26 million during the same period in 2014 without revealing detailed financial figures.

Huawei announced shipments of 31 million units during the same period, a 40 percent increase compared to last year, without revealing detailed financial numbers. Nubia has yet to report its shipment figures in China.

For Samsung, the data are depressing. In the first quarter of this year, its shipments to the Chinese mainland were 9.6 million devices compared to 20 million during the same period in 2014, according to IDC. That left it in fourth spot behind Apple, Xiaomi, and Huawei in China’s smartphone market, which is still the biggest in the world with estimated annual sales of about 400 million handsets.

“It (the fall in Samsung shipments) highlights the volatility of Chinese consumers’ brand preferences,” Wang, of IDC, said.

And there could be more pain on way for the South Korean company, analysts point out.

Xiaomi, Huawei and Nubia have launched models that target the 3,000-yuan ($480) price range, which used to be Samsung’s territory.

The Mi Note Pro from Xiaomi retails at 2,999 yuan, with the company reporting 1 million pre-orders before it hit the stores in May.

The P8 from Huawei came out in April and costs 2,888 yuan, while the Z9 from Nubia is more expensive at $3,499 yuan.

“These new products illustrate that consumers are shifting to devices that provide better user experience,” Wang Jingwen, an analyst at Canalys China in Shanghai, said. “They are going up upmarket (which is where Apple and Samsung are).”

At the top of that pyramid is Apple, the iconic iPhone brand. Despite the high cost and high rental fees charged by telecommunication providers to use their networks, the iPhone dwarfs its rivals.

At the start of the year, Apple consolidated its No 1 position in China by introducing a trade-in program, which saw a jaw-dropping 14.5 million smartphones delivered to the Chinese mainland in the first quarter. That was 1 million more units than Xiaomi in No 2 spot, according to IDC.

Since iPhone models retail at around 4,000 yuan, the gap in revenue with Xiaomi was stretched even further. To eventually challenge Apple, China’s leading companies will have to come up with better products and better deals.

“Apple’s trade-in initiative attracted more mid-end Chinese buyers and further increased the distance between local players,” Wang, of IDC, said.

Apart from having Apple and Samsung in their sights, China’s big three will have to keep a close eye on a new wave of domestic rivals. “Bringing down prices will be part of their strategy as other players enter the market,” Wang said.

Weeks after LeTV Holdings Co Ltd, an online video company, unveiled a large screen Android device, known as Le Max, in April, Xiaomi cut the price of its flagship Note Pro device by 300 yuan.

Motorola Mobility, now a Lenovo subsidiary, also followed suit by announcing a 300 yuan discount on its latest high-end Motorla X series model in a move to target young buyers.

Joining them will be a new smartphone launched by Zhou Hongyi, an Internet tycoon who owns the nation’s largest online security company Qihoo 360 Holdings Ltd.

Qihoo has linked up with Dongguan-based budget contract phone maker Coolpad Group to produce the Qiku range in the fall. Prices are believed to be around 3,000 yuan.

“The competition will be extremely fierce this year for Chinese vendors, especially for those who are moving up to high-end segment,” Zhou said. “But there will be winners.”