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More Foxconn Woes: Huge Fight Breaks Out

Foxconn may not be in the news like it once was, but not for lack of woes, it seems. The company revealed that a major fight erupted Thursday at a Foxconn campus in eastern China, and the firm says 11 people were injured. The fighting reportedly started as workers drank to mark a public holiday, the Mid-Autumn Festival. Pictures on social media show dozens of shirtless men carrying pipes and sticks, the Wall Street Journal reports. Unconfirmed reports say three people died, and ZDNet puts the number of those injured badly enough to require hospitalization at 27.

The company characterized the feud as “of a personal nature,” but ZDNet reports a conflict between provinces. The tech site says more than 200 armed workers from Guizhou province targeted dormitories at the Yantai campus, in Shandong province; they reportedly chanted, “Beat all that are from Shandong.” Either way, labor activists are speaking out after a summer that, the Journal notes, saw 183 strikes and protests at Chinese factories in general; that’s double last year’s tally. “Large-scale fights simply do not break out at well-run factories with a contented and well-paid workforce,” says one activist. The fight comes nearly a year to the day after a massive riot at another Foxconn factory.

China improves transparency for graduates recruitment

China’s educational authorities have vowed to improve transparency for recruiting graduate students, especially those recommended for admission, in order to safeguard fairness.

The Ministry of Education said in a circular on Wednesday that schools should ensure an open recruitment process by publicly stating selection criteria and publishing the lists of admitted students on their website for no less than 10 days for public scrutiny.

“Applicants whose names have not been made available to the public must not be admitted by schools,” it said.

Any issues should be investigated and rectified and supervision should be stepped up on recruitment, said the circular.

Applicants for graduate programs in Chinese universities or academic institutes should attend national exams, or recommended by schools where they pursued bachelor’s degrees for admission to graduate schools.

Cheating in exams should be prevented by ensuring smooth operation of the anti-cheating system including monitors and metal detectors, the circular urged.

Schools’ autonomy should be further expanded in recruiting graduate students and professors’ role should be given full play in selecting outstanding applicants, it added.

China Raises the Heat on Glaxo

BEIJING—GlaxoSmithKline GSK.LN +0.03% PLC came under new pressure as Chinese state-run news outlets ran reports of employees purportedly detained in a government bribery investigation of the drug maker saying that company executives created a sales culture that led to corruption.

China’s national broadcaster on Tuesday aired reports featuring what it said were detained employees saying that managers pressured sales representatives to get drugs to Chinese customers faster. The identities of the people, whose faces were blurred, couldn’t be verified.

A person identified as sales manager Huang Hong, who China Central Television said was one of four Glaxo employees detained in July, said in the report that former Glaxo China chief Mark Reilly told workers to enter hospitals to develop relationships with administrators to speed drugs’ entries into pharmacies.

Mr. Reilly couldn’t be reached for comment. Glaxo Chief Executive Andrew Witty in July said authorities hadn’t alleged wrongdoing by Mr. Reilly.

“Upper management came from sales, so they should have realized what they were doing,” the person identified as Ms. Huang said in the report.

Glaxo said the issues mentioned in the reports “would be a clear breach of our corporate values and we have zero tolerance for any behaviour of this nature.”

Chinese officials have alleged that Glaxo transferred three billion Chinese yuan, or about $490 million, through travel agencies since 2007, creating fake invoices to help the company generate money that could be used to bribe doctors. Officials in July said that some of the travel agencies offered Glaxo employees bribes in the form of sexual favors to keep the company’s business. Authorities didn’t disclose further details.

Glaxo has said that some senior executives may have violated Chinese laws and that it is cooperating with the probe.

The person identified as Ms. Huang said in Tuesday’s report that management instructed sales representatives to approach clients from the biggest and most powerful hospitals at least once a week and provide them with travel opportunities and gifts. The Wall Street Journal reported similar information last month, outlining information on trips and kickbacks that Glaxo allegedly offered to doctors.

Chinese authorities in July said Mr. Reilly left the country as they began investigations. Glaxo said Mr. Reilly left China on a preplanned business trip.

Glaxo in late July replaced Mr. Reilly as head of China with Hervé Gisserot, who had been co-head of Glaxo’s pharmaceutical business in Europe. Glaxo said at that time that Mr. Reilly would remain with Glaxo in London, helping the company respond to the Chinese investigation.

A report from China’s state-run Xinhua News Agency on Tuesday quoted Ms. Huang as saying that Glaxo management set sales growth goals of 25%, much higher than the industry standard of 7% to 8%. “Mr. Reilly’s company objective was, ‘Sales are king,’ ” Ms. Huang said.

The official People’s Daily quoted Glaxo’s head of recruitment in China, Guo Jianhua, saying that company executives shrugged off responsibility when authorities made bribery allegations. “When the problems were exposed, the company pushed all responsibilities to individual employees,” Mr. Guo said.

China Life-AMP JV takes shape

Australian fund house AMP Capital could be selling its range of equity, fixed income and multi-asset mutual funds to Chinese investors by February through its new joint-venture with China’s largest insurance company.

AMP will have a 15% stake in the Bejing-based JV, China Life AMP Management, with China Life controllling the remainder. Pending approval from the China Securities Regulatory Commission (CSRC), the JV will begin operations within the next six months, says Anthony Fasso, international CEO and head of global clients for AMP Capital, which oversees A$131 billion ($117.9 billion) in AUM.

Eventually, China Life AMP may consider multiple avenues to invest in the mainland, such as through the qualified foreign institutional investor (QFII) programme, although there are no firm plans at the moment, Fasso tells AsianInvestor.

The firms are focused on receiving authorisation from the CSRC to begin operations in Beijing, he adds.

At the moment, foreign financial institutions can only acquire up to 49% of a JV on the mainland. However, under proposed regulations by the Closer Economic Partnership Arrangement, foreign firms could own over 50% of a JV, allowing them to take a controlling stake.

If passed, this could have a significant impact for firms such as AMP. The firm declined to elaborate on potentially increasing stakes in the future.

“It’s been talked about for some time across many industries but I haven’t seen an update on it,” says Fasso. “We’re happy with the stake we have with the right partner.”

This JV marks the first time a foreign fund house will have partnered a Chinese insurance firm, and follows a new law coming into effect in June allowing mainland insurers to run and sell mutual funds.

Meanwhile, it offer AMP Capital a different means of distribution from the typical channels offered by Chinese banks.

Foreign fund houses seeking to set up an office on the mainland previously partnered with Chinese banks, securities firms or trust companies. The funds are dispensed through the banks’ platforms, which are becoming increasingly crowded.

The big four – Bank of China, Agricultural Bank of China, Industrial and Commercial Bank of China and China Construction Bank – account for 70% of fund sales on the mainland.

Insurers, which have large sales forces with both retail and institutional investors, long-term relationships with their clients and extensive data, are an appealing alternative.

“Our mutual funds are primarily aimed at retail investors, so historically they’ve been sold via bank channels,” Fasso says, adding that China Life, with one of the largest distribution platforms in the world, will “open up a broader geographic footprint” for AMP Capital.

“[Chinese insurers] have never sold mutual funds before, so it’s going to take time [before it takes off],” he notes. “But this is a very exciting platform to be involved in.

“Chinese investors are still becoming used to investing in mutual funds. There’s still low penetration. But as they become more sophisticated, they are looking for more choice, particularly around fixed income, equities and multi-asset funds,” Fasso says.

AMP and China Life executives are now working on staffing up the firm’s office in Beijing with executives in sales and marketing, client services, registry and record-keeping, compliance, risk management, finance, operations and regulatory issues.

Once the office is set up with staff later this year, CSRC will do an inspection and then award full authorisation.

Home prices keep rising in August

New home prices in 100 major cities averaged 10,442 yuan ($1,706) per square meter in August, rising for 15 consecutive months in month-on-month terms, and indicating the recovery of the property sector, a survey has shown.

Of the 100 cities tracked by the China Index Academy, the research arm of Soufun, China’s largest property website, 71 cities posted month-on-month increases, with 31 of them seeing prices rising at a pace above 1 percent, two cities fewer than in July.

The other 29 cities saw monthly declines, 10 cities fewer than in the previous month. Of those, 14 cities saw drops more than 1 percent.

On an annual basis, new home prices in those 100 cities increased 8.61 percent on average, 0.67 percentage point higher than in July.

Among the 10 largest cities, Beijing saw the biggest property inflation with a 3.22 percent month-on-month increase in August, trailed by Wuhan, Hubei province, which posted a 2.16 percent month-on-month increase.

On a year-on-year basis, new home prices in the 10 top-tier cities grew 12.18 percent in August, extending the period of gains to 10 months and pointing to robust housing demand.

“It’s increasingly less likely that we’ll see new tightening measures in the property market, and investors and homebuyers are returning to the market and pushing up prices because of the limited supply,” said Huang Zhijian, chief analyst at Shanghai Uwin Real Estate Information Services Co.

Loosened purchase restrictions in Wenzhou, Zhejiang province, and Wuhu, Anhui province, have sent signals lately that a relaxed policy environment might be in the works by local governments, and trading is now more active than a few months ago, said the report.

In August, Wenzhou quietly loosened purchase restrictions in the housing market by allowing local and non-local residents to buy second homes, while Wuhu decided to abolish transfer taxes and start paying a 20,000-yuan subsidy to undergraduate homebuyers with three-year work experience in the city.

Zhang Dawei, research director at real estate company Centaline Group, said there will likely be more cities following those moves across the nation to ease purchase restrictions. Local governments rely heavily on the property market, a key driver of economic growth and a cash cow for them, Zhang added.

However, Hui Jianqiang, research director of Beijing Zhongfang-yanxie Technology Service Ltd, said that Wenzhou and Wuhu tweaked the policies to stop the continuous fall of home prices in the two cities.

Wuhu saw the heaviest losses in the home price list after shedding 2.29 percent month-on-month, while Wenzhou saw home prices decrease 0.31 percent.

Xu Shaoshi, minister of the National Development and Reform Commission, said in a report delivered to a meeting of the Standing Committee of the National People’s Congress on Aug 28 that the government will launch pilot property tax programs in more cities.

“There will be between six and eight more cities with trial property tax programs this year, with some of them possibly levying the tax on pre-owned homes,” said Chen Sheng, vice-president of the China Real Estate Data Academy.

Most opposed to increasing retirement age

An overwhelming majority of those questioned in an online survey expressed opposition to a proposal pushing back the retirement age.

Nearly 95 percent of some 25,300 polled netizens said they were against the prospect of the retirement age being increased, according to the survey jointly conducted by the Beijing-based China Youth Daily and Sohu, a leading news portal.

The retirement age in China is 60 for male employees, 55 for female officials and 50 for female workers. Retirees can claim a pension immediately.

Delaying the pension age would relieve the State’s financial burden in supporting a rapidly aging population, according to a proposal released by Tsinghua University earlier this month. It suggested that the government should lift the pension age for workers, both men and women, to 65 from 2030.

Yang Yansui, director of the Tsinghua Center for Employment and Social Security and one of the drafters of the proposal, said it is a matter of urgency for China to lift the pension age given the accelerated imbalance between the working-aged population and the number of senior citizens.

Currently, it takes about seven workers to support one pensioner over 65.

If there is no change to the system, in 2035, it will take two workers to support a pensioner and this would place a heavy burden on the economy, Yang said.

However, about 91 percent of respondents said that they were unwilling to work until 65. Most of the surveyed were aged between 24 to 53, according China Youth Daily on Thursday.

Some 60 percent believed they would be physically incapable of working up to 65 and half of them said increasing the retirement age would make it harder for younger people to get work.

Ma Chenkai, department manager of a toy company in Dongguan, Guangdong province, said it is unrealistic to require blue-collar workers to postpone retirement.

“It’s physically demanding to work in manufacturing workshops, eyesight and energy levels deteriorate,” Ma, 43, said.

“Plus, their wages will not rise that much even if they continue to work. So the option of looking after their grandchildren at home becomes even more attractive.”

More than 60 percent of those polled believed China should introduce more flexible retirement arrangements for people from different walks of life.

Li Guizhen, associate chief technician from the department of laboratory medicine in the Tianjin Academy of Traditional Chinese Medicine Affiliated Hospital, said she would be happy to prolong her working life, as she believes it is a waste of medical expertise to let female paramedics retire at 55.

“It takes years of education and training to become a senior medical professional and I feel energetic, so I prefer to contribute more to society,” said Li.

There is no one-size-fits-all solution in terms of the retirement age and the government should allow people to have more options, based on health and their attitude, Li said. She also agreed that the retirement age for government officials should not be pushed back as this would increase the taxpayers’ burden.

China to expand employment for the disabled

BEIJING – At least one disabled person should be employed in China’s provincial-level Party or government organs and municipal working committees for the disabled by 2020, according to an official statement.

Those bodies are asked to offer more preference to help the disabled get employment and ensure their rights to apply for the civil service, according to the statement posted Thursday on the website of China’s Disabled Persons’ Federation (CDPF).

At least 15 percent of disabled people should be employed in provincial-level disabled persons’ federations, according to the statement.

The statement was jointly issued by seven departments including the Organization Department of the Communist Party of China Central Committee, the Ministry of Finance and the CDPF.

China has more than 85 million disabled people. The number is expected to exceed 160 million by 2050, according to the federation.

China’s National Human Rights Action Plan (2012-2015) provides that the country will stabilize and expand employment for the disabled.

Reality check at China’s Huawei boosts wages

BEIJING (Caixin Online) — Competition for fresh-faced university graduates is heating up in China’s telecom sector now that electronics equipment giant Huawei Technologies Co. has significantly hiked salaries for certain white collar employees.

The pay decision is also a signal that the world’s largest manufacturer of telecom gear remains committed to an ongoing expansion that encompasses new arenas, such as consumer smartphones.

First-year worker and junior executive paychecks were pushed up by as much as 35% in August following a July 29 announcement by the Shenzhen-based company.

Just a week earlier, Huawei’s biggest domestic rival, ZTE Communications HK:763 -0.13% CN:000063 -2.18% ZTCOY -0.27% , unveiled a new equity incentive plan designed to retain key white collar workers. The company said it would distribute about 103 million company shares as bonus compensation for 1,531 select employees.

Huawei’s pay hikes not only upstaged ZTE’s highly touted incentives program but also brought its salary scale a notch closer to levels offered in the country by foreign competitors including telecom multinationals Ericsson, Nokia NOK +0.25% FI:NOK1V +1.08% , Siemens XE:SIE +0.26% SI +0.12% and Samsung KR:005930 +0.97% SSNLF +2.50%

Probationary salaries for 2014 college graduates hired by Huawei will rise to more than 9,000 yuan ($1,470) per month from 6,500 yuan USDCNY -0.01% . Master’s degree graduates will be offered more than 10,000 yuan a month to start, up from 8,000 yuan, the company said.

Altogether, Huawei said it would boost the companywide payroll by more than 1 billion yuan. Performance-related pay hikes will range from 25% to 30%, depending on the type of work.

Management thus hopes to attract and retain employees in a competitive labor environment where Nokia, Siemens and other foreign companies generally offer new bachelor’s degree graduates at their China divisions between 8,000 and 10,000 yuan per month, said Wei Xiaokang, a headhunter for Beijing-based Offercome, which focuses on matching jobs and job seekers in the Internet industry.

“Huawei’s workplace environment is more intense than that of Ericsson and other multinational companies,” Wei said. “But the pay is lower.”

Huawei has also been fishing for talent in ZTE. Indeed, according to a ZTE source, the Huawei pay increases “drove ZTE (management) crazy” because in the first half of 2013 “a number of people” left ZTE for jobs at Huawei.

ZTE employs an estimated 50,000 to 60,000 people, one-third as many as Huawei.

“Raising junior executive salaries on such a large scale, as Huawei has done, undoubtedly marks a significant change in remuneration policy,” said Wei.

And it’s a surprising change for the company’s labor policy considering the weak business atmosphere in the telecom industry, where of late many companies have been downsizing, trimming costs and reducing product lineups.

Financial strength

Huawei was apparently in a better position to raise wages than its rivals thanks to high revenue growth during the first half of 2013, says Deutsche Telekom International Consulting’s director in China, Fang Honggang.

Privately held Huawei, which releases only sales revenue and net profit margin figures in its financial statements, reported “relatively optimistic… accounts receivable, bad debt treatment and possible risks,” Fang said.

Huawei reported sales of 113.8 billion yuan for the first six months of the year, up 10.8% over the same period of 2012. Moreover, company management forecast a 2013 net profit margin of 7% to 8%.

A Renmin University professor who also serves as a Huawei corporate management adviser, Wu Chunbo, said the company’s first half 2013 net profit was 14.3 billion yuan.

With the company on a sound financial footing, management was well prepared to turn attention to making junior executive salaries more competitive, a Huawei representative said.

What is this GEM manager’s golden rule for investing in China?

Investing in Chinese equities is not easy – even the most experienced investors can get their fingers burnt trying to find the right stocks to back in an opaque and volatile market – but one manager has a tip for would-be investors.

Mirabaud Asset Management’s Daniel Tubbs has one golden rule to invest successfully in the region – align yourself with whatever the government wants to do.

The group’s head of GEM and manager of the $108m Mirabaud Equities Global Emerging Markets fund said he has been choosing his investments according to government policy, backing the property and infrastructure sectors recently after an uptick in state support.

Tubbs (pictured) said the government’s spending on infrastructure such as railways is accelerating, while it is becoming more relaxed about the property market after three years spent trying to dampen the bubble.

“Average house prices have increased 6% year on year, in line with wage inflation,” said Tubbs. “We bought Yuexiu Property Company in January. It has a business on the eastern seaboard where there is still pent-up demand.

“It is one of the few property companies which has an investment grade rating, leading to a cheaper cost of capital, which is a big advantage for a property company. It has a 5% yield, trades on six times earnings, and has rallied a lot in the last few weeks,” he said.

One of the government’s long-term aims is to rebalance the Chinese economy towards domestic consumption, and it will do this by boosting income levels, said Tubbs. He owns China State Construction in the fund’s top ten holdings as a proxy to this theme.

The manager argued investors are too fixated on economic deceleration in the BRIC countries, especially China, and said a hard landing is not cause for concern as long as the corporate sector remains robust.

Low summer trading volumes have meant swings in sentiment are exaggerated, he added. This has combined with incremental positive data in the developed world to create a home bias, which is why emerging market equities have been at the sharp end of a sell-off in the last few months, said Tubbs.

He is overweight Russia, Turkey, and China because he is still able to find quality companies to own in those markets and, in China especially, he is seeing encouraging signs of stabilisation.

“It is wrong to be pessimistic on China – it was hard for it to continue to grow at 10% a year,” he said.

“I am not worried about growth decelerating as long as companies are still doing well. The Chinese companies we hold reported average net profit growth of 38% year on year in Q2, which is not bad considering the consensus forecast for the whole of China was in the teens.

“People have not given the government enough credit that it can manage the recovery.”

Over the year to 27 August the Mirabaud fund has lost 2.91% against an average 0.11% gain from the Equity – Emerging Markets sector, according to FE.

China’s consumers take eagerly to credit

A few years after finishing university, Jack Dai thought he had scored the holy trinity of success for a young Chinese man: a government job, an apartment and a wife. But he had not counted on one additional factor, less visible from the surface, that soon drove a wedge between him and his conception of the good life.

To buy his Shanghai house, Mr Dai, 30, took out a hefty mortgage. Monthly repayments now swallow up half his salary. Plus he has the other expenses of Chinese middle-classdom – overseas holidays, shopping excursions, movies and restaurants.

Mr Dai is hemmed in by debt. “Every second month or so, I can’t pay off my credit card bill. I save nothing,” he sighs.

This experience for a young professional, hardly unusual in the west, is a radical departure for China. The older generation, that of Mr Dai’s parents, was famous for its saving prowess. Memories of deprived childhoods in the Maoist era led them to squirrel away most of their earnings even as their fortunes improved alongside China’s fast-growing economy from the 1980s on.

But the young urban Chinese who have entered the workforce over the past decade grew up amid plenty, and their views about saving and spending bear little resemblance to those of their parents. Their willingness to borrow for today and worry about repayment tomorrow is beginning to reshape China’s debt dynamics.