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China reports spike in agricultural trade with Africa
According to Xinhua on May 20, China-Africa trade on agricultural products has gone through years of fast growth and the trade volume reached US$4.78 billion in 2011, a Chinese official said.
The figure marked a 40.2 percent rise from the trade volume of the previous year and was 7.7 times that of 2001, said Wang Ying, the director of the Department of International Cooperation of the Ministry of Agriculture.
Wang delivered a speech during the China-Africa Business Cooperation Forum, which was held on May 19 to encourage further cooperation on agriculture between the two sides.
China exported US$2.45 billion in agricultural prod- ucts to African countries in 2011, up 35.7 percent year-onyear, and imports increased 45.2 percent to reach 2.33 billion U.S. dollars, according to Wang.
To help Africa raise local agricultural productivity and enhance food security, China has also set up 25 agricultural demonstration centers and trained more than 4,000 agricultural technicians and practitioners there since 2006. The bilateral trade value exceeded US$160 billion in 2011, according to a document presented at the forum.
Comment
As Africa’s largest trading partner, as well as the continent’s top FDI source, China will continue to promote cooperation on farming technology and personnel training and encourage more domestic companies to invest in Africa.
China farm produce prices rebound slightly
Xinhua reported on May 2 that China’s farm produce prices mostly rebounded, ending a five-consecutiveweek downward trend as persistent rainfall limited market supplies, new data has shown.
The wholesale price of 18 types of vegetables rose 2.4% during the week ending April 29, with prices of white radishes, rapes and tomatoes up 14.4%, 11.8% and 9.8%, respectively, the Ministry of Commerce said in a statement on its website.
The wholesale price of eight staple aquatic products edged up 1.1% last week, while those of peanut oil, colza oil and bean oil increased 0.6%, 0.1% and 0.1%, respectively. Meanwhile, rice prices inched up 0.2% and the price of flour stayed unchanged, according to the ministry.
However, pork and eggs prices continued to decline. Pork went down 0.1% week on week and 14.1% cumulatively since late January, while eggs dropped 0.5% last week and 8.9% cumulatively since the beginning of the year.
Food prices have a one-third weighting in the calculation of China’s consumer price index (CPI), the major gauge of inflation. China’s CPI rebounded to 3.6% in March, after easing to a 20-month low of 3.2% in February.
Comment
Food price is still one of the most important elements for the government to manage inflation.
China invests 600 bln in farmland improvement
According to Xinhua on April 24, China’s government will invest around RMB600 billion (US$95 billion) between 2011 and 2015 in turning the nation’s scattered and dilapidated rural lands into efficient farming areas, under Ministry of Land and Resources plans unveiled.
Dong Zuoji, director of the ministry’s planning department, said at a press conference that the fund will help establish 400 million mu (around 26.7 million hectares) of efficient farmland across the country by 2015.
The investment will also help newly create 24 million mu of agricultural land in the period, Dong said. The official estimated the campaign will boost the nation’s grain output by 25 million tonnes.
The government will optimize the layout of construction land in rural areas and urge local regions to use land more frugally, according to the plans. Meanwhile, farmland damaged by construction will be reclaimed, Dong said.
Comment
To ensure grain security, China strives to keep at least 1.8 billion mu of farmland for grain production. However, the nation faces increasing challenges to maintain the quota as official data has showed the country’s total acreage of farmland stood at 1.826 billion mu in 2010, down from 1.945 billion mu in 1998.
China grants extra quotas for rare earth exports
The Ministry of Commerce announced on May 17 additional export quotas for rare earth minerals totalling 10,680 tonnes, as China.org.cn reported.
Of the added quotas, 9,490 tonnes were light rare earths, and 1,190 tonnes were medium and heavy rare earths, a statement on the MOC website said.
The added quotas would be provided to a total of 12 companies which had recently passed examinations by the Ministry of Environmental Protection, the statement said.
The companies included Baogang Group, the country’s largest light rare earth producer, and the Aluminum Corporation of China, the statement said.
The quotas would be addition to the nation’s first batch of rare earth export quotas, the statement said.
On December 27 last year, the ministry announced the country’s first batch of rare earth export quotas totalling 10,546 tonnes for 11 qualified companies in 2012.
The ministry also noted that companies that had yet to pass the environmental examination would not get the export rights if they failed to meet the second round of environmental examinations before the end of July.
China supplies more than 90 percent of the world’s rare earth metals, but its reserves only account for about one-third of the world’s total.
Comment
Faced with widespread environmental challenges, it is justified for China to set production caps, stricter environmental standards and an export quota system for rare earth metals in recent years to protect the environment and preserve the exhaustible resource.
New platform gives iron ore traders muscle
An iron ore trading platform made its China debut on May 8 as the world’s biggest buyer of the commodity sought to enhance its price-setting influence, according to China Daily report.
Trading volume is expected to reach approximately 100 million tons by the end of this year. This will account for about 14 percent of China’s annual iron ore imports, said Xu Xu, chairman of the China Chamber of Commerce of Metals, Minerals & Chemicals Importers & Exporters, one of the organizers of the platform.
Just a few minutes after its official launch, the platform saw its first transaction with 165,000 tons sold for $145 a ton, including freight. This was in line with market expectations, analysts said.
China, with a leading role in the market, has long argued that it should have a greater say in pricing.
The platform helps it wrest some control from top miners such as Vale, Rio Tinto and BHP Billiton.
The exchange said the platform will offer contracts settled in US dollars and yuan. The exchange will charge a commission fee for both buyers and sellers of 0.125 yuan or $0.02 per ton.
The exchange has said banks and financial firms would not be allowed to participate in a bid to stem speculation, and there will be no trading of derivatives.
Currently, trading in the spot market for seaborne cargoes is done directly between buyer and seller. Global miners e-mail or fax prospective buyers whenever they sell cargoes via spot tenders, a system deemed efficient and free of broking fees.
Traders say unless China offers incentives, such as tax rebates or commission discounts, they are unlikely to migrate to the platform anytime soon.
The platform has more than 150 companies as members so far. Top international mining conglomerates, along with major Chinese steel producers including Baosteel, Hebei Steel and Wuhan Steel, have all signed up as members of the electronic platform op- erated by China Beijing International Mining Exchange.
Zhang Lin, senior researcher of Lange Steel Information Research Center, forecast that the platform will come into its own when it can attract about half of China’s imports.
Angang Steel, which is a member of the platform, will put up to 30 percent of the company’s iron ore for trade on the platform, said Li Daguang, deputy general manager of Angang Group International Trade Corp.
Foreign miners were adopting a wait-and-see approach.
“We believe the new system will bring more transparency because prices are not created by the platform, but reflect real transactions,” said Luiz Meriz, president of Vale Minerals China Co Ltd. “So, we are very supportive.”
Comment
With growth in Chinese demand for iron ore this year slowing, along with the overall economy, the pricing dynamic is changing to China’s advantage, whereas the last few years have very much been a sellers’ market.
Several iron ore exporting countries raised tariffs
It is learned from oversea reports that, Indonesia launched a 20% tariff on 14 mineral products including iron ore since May 6th. It is reported, in addition to Indonesia, other countries will lift tariffs or limit the export of mineral resources. Among them, India, Vietnam will increase iron ore export tariffs, and Australia will levy carbon tax and mineral resource rent tax since July 1st, said National Business Daily.
An industry participant said during an interview with National Business Daily, rising taxes will not only bring a higher cost to Chinese steel enterprises, but also restrain their investments in oversea mineral resources. “China has realized the necessity to invest in oversea mines or acquire ore mining rights, but at the same time, resource protection consciousness in foreign countries is gradually strengthening.”
This is impeding Chinese steel enterprises’ “overseas mine acquisition”. In recent years, to break the monopoly of three leading ore traders, Chinese steel enterprises have tried to diversify the sourcing channel, and made some progress. According to Lange Steel Information Network, although Australia is still a major exporter of iron ore, the first two months of 2012 witnessed an increase of African ores, with the ratio up from 6.04% at the same time in 2011 to 6.95%. Meanwhile, imports of South American ores increased slightly, up from 24.27% to 25.92%.
“As the three leading miners monopolize global iron ore market, China try to break the monopoly by expanding imports of other ores. However, when more and more non-traditional countries begin to limit exports of mineral measures, China will encounter challenges.” Umetal iron ore analyst Tang Jing said.
Comment
With many countries carrying out in succession policies to increase tariffs or restrict exports of certain mineral resources, Chinese steel enterprises will face more challenges in acquiring overseas mines. Therefore, how to avoid foreign policy barriers, and explore oversea market effectively, is the problem facing Chinese steel enterprises.
Oil and other five minerals have an external dependence of over 50%
Beijing Business Today reported that while the foreign dependence of oil and iron ore continue to rise, exports of refined aluminum, refined copper, sylvite and other bulk minerals are increasing because of insufficient “domestic supply”, resulting in an increase of external dependence of bulk minerals in the past 15 years. Minister of Land and Resources, Xu Shaoshi said, the above five minerals all have a foreign dependence of more than 50%. And with the global competition for mineral resources becoming fiercer, the cost and risk of utilizing oversea mineral resources will increase gradually.
Lin Boqiang, director of China Energy Economics Research Center, said, it is a fact that China has a high dependence and demand for foreign mineral resources, and increases in mineral prices in recent years have pushed up the costs for Chinese buyers. Excessive dependence on imports will certainly affect China’s economic security, so it is quite necessary for China to strengthen mining of mineral resources.
Last October, the State Council approved the Prospecting Breakthrough Strategy Platform for Action (2011-2020), making clear the strategic roadmap for prospecting in next 10 years.
Comment
Along with the rapid development of emerging economies, national economic games and global competition for mineral resources will increase, and the costs of utilizing oversea mineral resources rise sharply, so the risk of excessive dependence on imports is higher and higher. China should focus on developing local resources while exploring oversea markets.
Coal conversion in an era of high oil prices
According to China Petrochemical News, the 12th Five-Year Plan for National Energy Science and Technology (2011 to 2015) lists coal processing and conversion as national energy strategy for the first time, providing technical support and assurance for China to further reduce dependence on imported crude oil.
Low oil prices era has gone. Due to geopolitical, debt crisis in Europe and America and other factors, crude oil prices in international market hiked continuously in recent years. Industry experts expect that international oil prices will stay high. China has rich coal but poor oil reserves, and high international oil prices will boost coal conversion into clean fuel, in order to replace petroleum. It has an important strategic significance.
Comment
This move not only reflects the focus on coal conversion, but also suggests that coal conversion and utilization will be a key direction for coal industry in next five years, and that China will continue to increase the input in coal conversion science and technology. The plan especially emphasized energy saving and emission reduction in coal conversion process, which is the key to coal conversion.
Solar insiders upbeat on industry’s future
Solar industry insiders remain optimistic about the sector’s future, despite the recent challenges it has faced from a supply glut and weak demand, China Daily reported.
Shares in solar power companies are falling and some big players have even gone to the wall. But many insiders say they are confident that the market will revive, especially with the growth in Asia and the Americas.
“I believe the market will revive in 12 to 18 months,”Brian Lau, director of DEK Solar, said at the Sixth SNEC PV Power Expo.
Oversupply of polysilicon, a key component in manufacturing solar panels, has been further depressing the price of solar cells. Meanwhile, European countries, formerly big consumers of solar products, are slashing subsidies for the industry due to the financial crisis.
Lau said the production capacity surplus is driving solar prices down, which makes manufacturers suffer. But it will push the industry to go forward, as once prices become lower, there will be more customers.
“After all, the industry cannot always rely on subsidies,”he said.
“It is painful for manufacturers, as the price falls. But it is a good thing, as a lower price means solar will be able to compete with other energies like natural gas or coal. It will become self-sustained,” said Rhone Resch, CEO of the Solar Energy Industries Association, the national trade association of the solar energy industry in United States.
Manz AG, a Germany-based manufacturer of production systems for making crystalline solar cells and thin-film solar modules, established its biggest plant worldwide in Suzhou, an eastern city close to Shanghai.
“Almost all companies are losing money because of overcapacity in the sector across the country, including us,”said Dieter Manz, the company’s founder and chief executive officer.
“But the user market is growing really fast so we still see great opportunities. You need quite some investment to achieve economy of scale, which is notably critical to the industry,” he added.
Due to technological advances, the cost of solar power has substantially lowered so he foresees a quick pickup in demand in the near future, with thin-film solar modules rebounding first, because its potential for cost reduction is far bigger than crystalline solar cells.
Comment
The growth of solar energy in Asia and the Americas and the price falling is good news for solar power companies though they are still suffering from overcapacity.
China’s nuclear industry reeling
Japan’s nuclear emergency of last year has left a mark on Chinese nuclear manufacturers, which have since seen billions of yuan worth of orders postponed, a senior industry official was cited as saying by China Daily.
“Work stalled on 14 of the 27 reactors that were under construction before Japan’s nuclear emergency, causing orders worth 50 billion yuan ($7.9 billion) to be delayed,” said Sui Yongbin, chief engineer of the China Machinery Industry Federation, an industrial organization that represents machinery manufacturers.
The country suspended giving approvals to nuclear projects for 14 months starting on March 16, 2011, in response to the nuclear leak that occurred at a Japanese nuclear plant following the earthquake and tsunami that struck the island country in the same month. Work on recently approved projects was also stalled to give the government time to conduct safety inspections.
Shanghai Electric Group Co Ltd, one of the three largest nuclear equipment makers in China, said it received no orders in 2011.
“China’s nuclear industry was expanding too quickly before the nuclear crisis last year and that will ultimately end in diminished quality,” Sui said.
The engineer also warned that Chinese nuclear manufacturers are now dealing with overcapacity as the world nuclear industry enters a trough, adding that strong competition already exists among Chinese manufacturers.
“Manufacturers can produce 20 pressure vessels every year and they are competing with each other by offering lower prices,” Sui said. “In the meantime, we are still importing certain key components from foreign companies.”
China can manufacture 12 nuclear reactors sets annually whereas the industry needs only 40 sets before 2020, according to Sui.
Comment
Japan’s nuclear crisis has left a shadow over the use of nuclear energy in the world. China is no exception.
Domestic textile shoes and hats export lose USD 5.5 billion due to technical barriers
China Light Textile News reported that on May 14, the General Administration of Quality Supervision released the sample survey data of the impact imposed by the overseas technical trade measures on 2,600 domestic export enterprises. The data indicates that the domestic export textile shoes and hats industry is among the top five industries severely impacted by overseas technical trade measures and the direct loss of the export textile shoes and hats throughout the year stood at USD 5.541 billion, accounting for 8.9% of the total direct export loss. The industrial insiders hold that the Chinese textile shoes and hats export departments and enterprises need to timely take effective measures and positively respond to overseas technical barrier measures in a bid to ensure the healthy export of the domestic textile shoes and hats.
It is learned that in 2011, 35.16% of the export enterprises are impacted by the overseas technical trade measures to different degrees; the direct loss from export reached USD 62.259 billion last year, USD 4.018 billion more than 2010, accounting for 3.27% of the export volume during that period, and 0.42% less than that in 2010; in response to the overseas technical barrier measures, the domestic enterprises spend USD 25.962 billion more, up by USD 1.571 billion over that in the previous year.
The sampling shows that the technical barrier measures implemented by the major trade partners impacting the Chinese industrial products exports can be categorized into five classes—certification requirement, technical standard requirement, limit of toxic and hazardous substances, label identifying requirement as well as packaging and materials.
Comment
Confronted with more impact from various overseas technical trade measures, the Chinese foreign trade enterprises should keep abreast of the latest development and the new regulations of the overseas technical trade measures and timely formulate targeted countermeasures so that the impact on the domestic foreign trade imposed by the overseas technical trade measures can be minimized. In the mean time, relevant governmental departments are supposed to establish sound technical trade barrier warning and speedy reaction mechanism in a move to create favorable conditions for the exports of the domestic enterprises.
Household textile and clothing enterprises seeking new development potential by turning to E-commerce
The Household Textile and Clothing Exhibition was held during May 1 to 5 at the 3rd Session of the Canton Fair. Due to the declining macro economy, in the first three months the household textile industry saw the biggest negative sales growth over the past 10 years. Stepping into such a trough, how can the domestic household textile export enterprises react? At the Canton Fair, the reporter found in interviews that some traditional household textile enterprises began to turn to e-commerce. The domestic export enterprises need to address the industrial dilemma by transformation and upgrading through channel innovation.
Shanghai Homes Household Textile Co,. Ltd. (hereinafter referred to as Homes), well known as China’s “supermarket king” in the domestic household textile sector, begins to fully enter e-commerce sales. On the occasion of the opening of the 3rd Session of the 111th Canton Fair in early May, Dong Fulong, President of Homes and Vice Chairman of Shanghai Household Textile Products Association, announced that Homes reaped RMB 10 million from online sales in April, achieving sales channel transformation and upgrading. Dong said that so far Homes had successfully combined online sales with offline sales and in future supermarket supply and export OEM ratio will decrease, while online sales will increase to account for a ratio of around 50%.
Industrial insiders point out that at this year’s Canton Fair, Homes, the “supermarket king” in the Chinese household textile announced in a high profile its launching into e-commerce along with its operation objective, which undoubtedly has landmark implications in the household textile sector. This signals that the domestic textile sector begins to accelerate sales channel transformation and upgrading and that the household e-commerce era has already come.
At the 111th Canton Fair, the gloomy industrial situation made many household textile enterprises feel stressful and begin to turn to e-commerce so as to respond to industrial changes. Such brands as Lovo and Fuanna have opened their own B2C e-commerce business and set up flagship shops on Jingdong and Taobao shopping platform. It is an inevitable trend for the household textile enterprises to nudge into online sales on a full scale.
Comment
Entering e-commerce provides more potential market for the traditional household textile export enterprises and in the upcoming years, the proportion of e-commerce sales volume of the household textile industry will gradually rise to 10% in the entire sales volume. In more years to come, the proportion may jump to 50%.
China readies more incentives for EV development
China, the world’s biggest emitter of greenhouse gases, said it will take additional steps to promote development of electric cars and plug-in hybrids, according to Bloomberg report.
The government will broaden pilot programs, build recharging facilities and develop a plan to recycle batteries, the State Council said in a statement on its Web site in April.
The subsidies are part of the government’s drive to have 500,000 such vehicles by 2015, rising to 5 million units by 2020.
“This clarifies the direction for all participants, carmakers, consumers and regulators,” said Thomas McGuckin, the Shanghai partner who oversees the Asia Pacific automotive practice at PricewaterhouseCoopers. “The price point, infrastructure and consumer usage patterns ultimately will determine adoption.”
General Motors and Volkswagen AG have announced plans to introduce EVs and hybrids in China, which seeks to cut smog and its reliance on imported oil. BYD Co., the Chinese carmaker partly owned by Warren Buffett’s Berkshire Hathaway Inc., this week will introduce the first EV model developed by its venture with Daimler AG.
The State Council said in the statement that development should be built on existing production capacity and that the industry should guard against “blind, low-quality investment and wasteful construction.”
The government wants to lower the average fuel consumption of passenger cars to 5 liters per 100 kilometers by 2020, according to the statement.
Government subsidies
Buyers of energy-efficient cars in Shanghai, Shenzhen and four other Chinese cities qualify for a 60,000 yuan ($9,500) subsidy.
This has happened even though the central government offers a paltry 3,000 yuan ($475) subsidy for conventional hybrids. By contrast, the government offers subsidies up to 60,000 yuan for an electric car and 50,000 yuan for a plug-in.
Electric-car sales in China are forecast to exceed those in the United States by 2020, Boston Consulting Group Inc. said in a report last June. Such cars may account for as much as 7 percent of total auto sales in China, the world’s largest vehicle market, by 2020, Boston Consulting said in the report.
China imports more than half of its crude oil consumption, and it is the world’s second-largest importer of oil after the United States, giving it incentive to encourage use of more fuel-efficient vehicles.
The country also is trying to reduce smog. Air quality in all of the 32 Chinese cities that track pollution falls short of World Health Organization guidelines, with Beijing among the world’s most polluted cities.
GM, the largest foreign carmaker in China, introduced its Chevrolet Volt plug-in hybrid car in the country on Nov. 21. The Volt will complement an all-electric car that GM is developing with its Chinese partner, SAIC Motor Corp., the automaker said.
Volkswagen plans to mass-produce EVs in China in 2018, VW China CEO Karl-Thomas Neumann said on Feb. 14. Nissan Motor Co., which leads Japanese carmakers in China sales, plans to export its all-electric Leaf car to the country for fleet sales, Nissan said in last September.
Comment
It is Chinese government’s goal that China would be the world’s largest EV market. However, it is still far away from the target. China ranked fifth globally behind Japan, the United States, France and Germany in the adoption of batterypowered vehicles, falling from third place in 2010, according to a McKinsey & Co. report released April 20.
A lack of consumer demand, limited models and inadequate charging stations were other reasons contributing to the decline, McKinsey said. Also, China built about 16,000 charging points last year, less than 5 percent of the government’s 2015 target for 400,000 charging stations, according to McKinsey.
“Consumer sales of electric vehicles in China face the same obstacles as in the United States: high prices, limited driving range, and an inadequate recharging infrastructure.” said Alysha Webb, a former China correspondent for Automotive News.“In the near future, most of those EVs will be owned by the government fleets, not consumers. It’s unclear when, if ever, Chinese consumers will warm to electric vehicles,” Webb said.
China’s wine investment market cools down
China, the world’s fifth largest wine consumer, has shown the sign of a cooling wine market, the Oriental Morning Post reported on May 14.
Shanghai, China’s main distribution center for imported wines, have seen declining wine imports for five consecutive months, Xinhua News Agency reported.
The Shanghai Customs District imported 29.63 million liters of wine in the first quarter of this year, and the average price dropped to $9.8 per liter. March imports were 7.35 million liters, a month-on-moth decrease of 11.3 percent according to the Xinhua report.
By contrast, in the second half of last year, the domestic wine market was extremely hot, and the average price reached$11.6 per liter.
According to industry insiders, China’s wine market is returning to rational, said the Oriental Morning Post report.
Affected by the cooling high-end wine investment market, prices of products from Chateau Lafite Rothschild, a topnotch French vineyard plummeted. As of May 8, the bonded price of a 2008 Lafite product tumbled 53.4 percent to 7,230 yuan ($1,143.79) from 15,500 yuan and the bonded price of a 2004 Lafite product fell to 2,850 yuan from 4,900 yuan.
The report also quoted Wang Jiaqi, business development director of Shanghai Wine Exchange, as saying that before February 2011, prices of Lafite products had been skyrocketing, with buyers from China being an important force for its boom.
According to previously published data from the French Bordeaux Wine Industry Associations in 2010, China replaced the United Kingdom and Germany for the first time to become the largest importer of Bordeaux wine in 2010.
Comment
China’s booming wine market is returning to rational after the market frenzy.
China’s e-shopping market to top world in 2013
The transaction size of China’s online shopping market will surpass Japan in 2012, and exceed the United States by 2013, becoming the world’s largest online trading market, reported Economic Information Daily on May 17.
The report cited the China Business Development Report Forecast (2011-2012) released by the National Academy of Economic Strategy of Chinese Academy of Social Sciences (CASS).
The report noted that even if China becomes the world’s largest online trading market in the next year, the thriving online shopping market is not enough to cover up problems in the general Chinese circulation industry.
According to Jing Linbo, vice-president of the National Academy of Economic Strategy of CASS, the fundamental reason lies in unclear positioning of China’s circulation industry.
He stated that other problems include market segmentation, enterprises scattered with low concentration, a less competitive market, a lack of theoretical research to guide the practice, and the need for improvement of personnel training.
Comment
Though the online shopping market is thriving in China, it has to confront with many problems, include those in the circulation industry.
China’s online third-party payment booms in Q1
China’s online third-party payment market reached 758.3 billion yuan($120.49 billion) in the first quarter of 2012, a major tech and Internet information provider was quoted as saying by Xinhua on May 7.
The figure represents a 90.9 percent year-on-year increase, and 2.7 percent increase compared to the last quarter of 2011, according to the results of a seasonal survey of China’s online third-party payment market conducted by Analysys International.
The quarter-on-quarter decline in the industry’s growth rate was due to the holiday season and the overdrawn consuming ability in the previous year-end sales promotion, said Zhang Meng, an analyst with the firm.
Comment
The burgeoning online shopping drives the growth of thirdparty payment.
Foxconn builds Chinese mainland headquarters in Shanghai
Xinhua reported on May 10 that the Foxconn Technology Group, a main supplier of electronic components for Apple, started construction on its Chinese mainland headquarters in Shanghai.
The headquarters, located in the Lujiazui financial district, will function as a research and development center and facilitate the company’ step toward a new business model, Gou said, adding that the company also plans to set up an ebusiness center in Shanghai’ Minhang district.
Foxconn is the world’ largest maker of computer components and is responsible for assembling products for Apple, Sony and Nokia.
Comment
The construction of the headquarters represents a shift for the company, as it will focus more on the domestic market and less on exports.
ZTE sets its sights on Europe
According to China Daily on May 1, ZTE Corp plans to strengthen its position in the European market in the fields of telecom infrastructure, smart phones and government and enterprise solutions, according to company officials.
Since being established in China’s southern coastal cityShenzhen in 1985, ZTE has grown into a telecom-hardware giant, the fourth-largest mobile phone maker by shipments and fifth-largest telecom equipment maker by sales - competing with the likes of Sweden’s Telefon AB L.M. Ericsson and Paris-based Alcatel-Lucent.
Because of a global decline in telecom carrier spending on network construction, ZTE diversified its core businesses in recent years to explore new markets, such as mobile phones and enterprise IT solutions.
Last year, its overseas revenue was nearly RMB 47 billion (US$7.5 billion), 54.2 percent of its total revenue. The European and North American market grew the most last year, 42.2 percent year-on-year to RMB 20.45 billion.
With nearly one-fourth of its revenue coming from Europe and the US, it has become increasingly dependent on the growth there, Dai Shu, director of corporate branding and communications at ZTE, said.
“ZTE aims for a steady increase in market share in European countries,” Dai said. The European market is mature and well-regulated. Meanwhile, many European-based telecom operators, such as Telefonica and France Telecom, conduct business globally, and may introduce extensive business opportunities for ZTE.
“Since European-based telecom carriers combined occupy more than half of the world’s telecom network market, ZTE will benefit in the short and long run from cooperation with those multinational operators,” Dai said.
As early as 2000, ZTE had set up offices in various European countries. However, they didn’t really take off until 2006 to 2007, when it finally won the trust of the major European telecom carriers.
ZTE employs around 1,000 people in Europe, more than 60 percent of whom are citizens of the countries where they work.
ZTE’s telecom system equipment has been imple- mented by nine of Europe’s top 10 operators, according to its 2011 financial report. The company is also seeking to provide telecom operation services to European customers, said He Shiyou, ZTE’s executive vice-president, at the company’s annual analyst conference in Shenzhen last month.
But ZTE’s most notable business in Europe remains in consumer devices. It was the world’s fourth mobile phone vendor in the fourth quarter last year, shipping 18.9 million units, according to research firm Gartner Inc.
It could be shipping 100 million smart phones a year by 2015, according to Reuters. Europe will be a major target market for its mid-level to high-end smart phones as it tries to reverse a decline in its gross profit margin, He said.
“We’ll do more promotions for our mobile phones in Europe this year,” Dai said. ZTE is boosting advertising because many European consumers still know little about the company.
By cooperating with local carriers, it has secured about a 10 percent share of the mobile phone market in many European countries. Sales of the Blade 880, a ZTE entry-level smartphone, have approached 10 million units worldwide since it debuted in the United Kingdom in late 2010.
ZTE’s third focal point in Europe is said to be the government and enterprise businesses, specifically, in telecommunication and IT solutions to clients from governments and the energy, transportation and education industries.
Xu Ming, ZTE vice-president, said the company is aiming for more than US$6 billion in government and enterprise business sales by 2015, up from $1.6 billon last year. Overseas markets are likely to contribute more than 60 percent of its total government and enterprise business sales by 2015, he added.
Comment
The construction of the headquarters represents a shift for the company, as it will focus more on the domestic market and less on exports.
Short films show strong life during fair
More than 1,000 short films from the Chinese mainland and overseas were assembled in Shenzhen, Guangdong province, on May 17 and 18 for the third China International New Media Shorts Festival and KingBonn Award Competition, China Daily reported.
The annual event, put on by the State Administration of Radio, Film and Television and the Shenzhen government since 2010, attracted almost 30,000 short films from 63 countries this year. Awards in 11 categories will be given to the best of them, going to the films deemed to be the best dramas, animations and documentary shorts, among other superlatives.
The biggest award will go to “the Best Short” and will come with 300,000 yuan ($47,000) in prize money.
Beyond winning awards and gaining international exposure, film producers who attend the event are also looking for business opportunities.
Zheng Dingwen, deputy general manger of Shenzhen Media Group, the main organizer of the festival, said, “I have a feeling that people came last year just to be onlookers but this year have come with more real intentions to buy. The potential buyers are mainly traditional TV stations, big video websites, and the most popular products are short dramas and animations.
“Short films are a new offering and have only become popular in the last two or three years, but the future for them is very bright. It’s a trend that is keeping up with changes in our lives.”
Zheng said China Mobile in 2010 introduced a program called GkerGshooting, which allows subscribers to shoot videos using their mobile phones and then upload them. The program generated 5 million yuan in revenue in its first year and more than 60 million yuan in its second.
“It (the film festival) presents a good opportunity,” said Li Xusheng, general manager of Shenzhen BOX Digital Animation.
For a second year in a row, he has come to the festival to promote his short 3D animations, which he makes money from by implanting ads in them.
“Several companies and organizations contacted me after the event last year with the intention of cooperating, including some from France and Hong Kong,” he said. “They want to sell their short films through our channel.”
Comment
In the fast-paced society, the appearance of short films satisfies people’s various needs with their flexibility.
Animation industry “still lagging”
The animation and cartoon industry is booming in China but experts say there is still a long way to go before it will make a big impression on the international market, according to a China Daily report.
A total of 260,000 minutes of animation material was produced in the country in 2011, an increase of 18 percent from 220,000 minutes in 2010, according to the State Administration of Radio, Film and Television. The growth is almost twice as much as the increase in China’s gross domestic product last year of 9.2 percent.
However, experts said the gap between Chinese and foreign markets remains huge and the domestic development is not only constrained by lack of talented and creative people but also the absence of a complete industrial chain.
“We have seen significant growth in quality and quantity of the made-in-China products. However, there is a long way to go to before the nation can take a strong role in the international market,” said Jin Delong, director of the publicity management department at the State Administration of Radio, Film and Television during the 8th China International Cartoon and Animation Festival.
The festival is the largest of its kind in China and involves seminars and exhibitions. It is held annually in Hangzhou, Zhejiang province. This year’s event ended on Thursday.
“Many products can be further improved in terms of content and design. Currently we have very few products that qualify as special. Many are mediocre,” Jin said.
In 2011, the cartoon and animation industry garnered a revenue of 60 billion yuan (9.52 billion U.S. dollars). In contrast, the sales reported by Walt Disney Co reached 40 billion U.S. dollars last year.
Experts said the lack of a complete value-making chain has become problematic for Chinese animation and cartoon makers seeking profitability. Currently, many companies expect profits to come from broadcasting.
Comment
China is a large country of animation works, but not a strong one. To speed up the development of this industry, a complete value-making chain is necessary.
China to buoy QFII inbound investment more aggressively
According to Xinhua on May 20, China will grant investment quotas by overseas funds in its domestic securities markets in a more swift and aggressive way before the country fully opens up its capital market with a convertible currency, according to the foreign exchange regulator.
The State Administration of Foreign Exchange (SAFE) will adopt fast-track procedures to approve investment quotas by medium- and long-term overseas funds, such as investment funds with foreign government background, overseas pension funds and insurance capital, the SAFE said in a statement on its website.
All overseas investment funds will be approved under the scheme of the Qualified Foreign Institutional Investor (QFII), which is launched in 2002 by the Chinese government to allow licensed foreign investors to buy and sell the A-shares when capital accounts are still controlled in the country.
To encourage the inflow of overseas investment funds, the SAFE promised to allocate more quotas for those mediumand long-term QFII funds when they first apply, while appropriately simplify the management process of foreign currency and Renminbi capital accounts.
The SAFE’s bolder move came after the State Council, or China’s Cabinet, hiked the country’s total QFII quotas from previously 30 billion U.S. dollars to 80 billion dollars last month.
According to the QFII scheme, the China Securities Regulatory Commission grants QFII licenses and market access to foreign investors, while the SAFE approves quotas for individual QFII funds.
“The QFII operations over the past 10 years showed the scheme is an important measure to facilitate the open-up of our capital market and promote the yuan’s convertibility,” Sun Lujun, director of the Capital Account Management Department with the SAFE.
Investment quotas totaling 26.01 billion U.S. dollars for 138 QFII funds have thus far been approved in China as of last week, according to SAFE data.
Comment
QFII scheme has played an active role in helping improve China’s institutional frame work, investment concept, corporate governance, risk control, technologies and custodian and brokers’ service quality.
New yuan lending drops, monetary loosening expected
Xinhua reported on May 11 that Chinese financial institutions lent less-thanexpected new loans in yuan in April as the economy continued to slow, strengthening expectations for further monetary loosening.
New yuan-denominated loans reached RMB 681.8 billion (US$108.2 billion) in April, down RMB 61.2 billion compared with a year earlier, China’s central bank said.
The figure was far below market estimates of around RMB 800 billion, following weak monthly data on investment, industrial output and consumption released.
April’s yuan lending was also the lowest this year, compared with RMB 1.01 trillion loaned in March, RMB 710.7 billion in February and RMB 738 billion in January, according to the People’s Bank of China (PBOC).
Financial regulators should unleash liquidity, drive down market interest rates, reduce corporate financing costs and speed up bank lending.
China’s imports edged up only 0.3 percent year-on-year in April while exports climbed 4.9 percent, both well below market estimates.
Urban fixed-asset investment rose 20.2 percent from the year before in the first four months, the slowest pace since the 17.4 percent growth recorded in 2002, the National Bureau of Statistics (NBS) said.
In April, industrial value-added output grew 9.3 percent year-on-year, its lowest pace in nearly three years, while retail sales climbed 14.1 percent, lower than the 15.2-percent increase in March.
The PBOC reiterated its stance of maintaining a prudent monetary policy in the months ahead, saying inflationary risks still deserve attention.
Analysts expect more reductions in the reserve requirement ratio for banks in the short term and interest rate cuts in the second or third quarter, but note that the central bank remains wary of price rebounds.
China’s consumer price index, a main gauge of inflation, rose 3.4 percent year-on-year in April, easing slightly from the 3.6-percent rate registered in March, the NBS said.
Comment
Of the new yuan lending, medium- and long-term loans now account for less than 25 percent, well below the 50 percent level in previous years, showing large companies’ borrowing demand has shrunk markedly.
According to Xinhua on May 20, China-Africa trade on agricultural products has gone through years of fast growth and the trade volume reached US$4.78 billion in 2011, a Chinese official said.
The figure marked a 40.2 percent rise from the trade volume of the previous year and was 7.7 times that of 2001, said Wang Ying, the director of the Department of International Cooperation of the Ministry of Agriculture.
Wang delivered a speech during the China-Africa Business Cooperation Forum, which was held on May 19 to encourage further cooperation on agriculture between the two sides.
China exported US$2.45 billion in agricultural prod- ucts to African countries in 2011, up 35.7 percent year-onyear, and imports increased 45.2 percent to reach 2.33 billion U.S. dollars, according to Wang.
To help Africa raise local agricultural productivity and enhance food security, China has also set up 25 agricultural demonstration centers and trained more than 4,000 agricultural technicians and practitioners there since 2006. The bilateral trade value exceeded US$160 billion in 2011, according to a document presented at the forum.
Comment
As Africa’s largest trading partner, as well as the continent’s top FDI source, China will continue to promote cooperation on farming technology and personnel training and encourage more domestic companies to invest in Africa.
China farm produce prices rebound slightly
Xinhua reported on May 2 that China’s farm produce prices mostly rebounded, ending a five-consecutiveweek downward trend as persistent rainfall limited market supplies, new data has shown.
The wholesale price of 18 types of vegetables rose 2.4% during the week ending April 29, with prices of white radishes, rapes and tomatoes up 14.4%, 11.8% and 9.8%, respectively, the Ministry of Commerce said in a statement on its website.
The wholesale price of eight staple aquatic products edged up 1.1% last week, while those of peanut oil, colza oil and bean oil increased 0.6%, 0.1% and 0.1%, respectively. Meanwhile, rice prices inched up 0.2% and the price of flour stayed unchanged, according to the ministry.
However, pork and eggs prices continued to decline. Pork went down 0.1% week on week and 14.1% cumulatively since late January, while eggs dropped 0.5% last week and 8.9% cumulatively since the beginning of the year.
Food prices have a one-third weighting in the calculation of China’s consumer price index (CPI), the major gauge of inflation. China’s CPI rebounded to 3.6% in March, after easing to a 20-month low of 3.2% in February.
Comment
Food price is still one of the most important elements for the government to manage inflation.
China invests 600 bln in farmland improvement
According to Xinhua on April 24, China’s government will invest around RMB600 billion (US$95 billion) between 2011 and 2015 in turning the nation’s scattered and dilapidated rural lands into efficient farming areas, under Ministry of Land and Resources plans unveiled.
Dong Zuoji, director of the ministry’s planning department, said at a press conference that the fund will help establish 400 million mu (around 26.7 million hectares) of efficient farmland across the country by 2015.
The investment will also help newly create 24 million mu of agricultural land in the period, Dong said. The official estimated the campaign will boost the nation’s grain output by 25 million tonnes.
The government will optimize the layout of construction land in rural areas and urge local regions to use land more frugally, according to the plans. Meanwhile, farmland damaged by construction will be reclaimed, Dong said.
Comment
To ensure grain security, China strives to keep at least 1.8 billion mu of farmland for grain production. However, the nation faces increasing challenges to maintain the quota as official data has showed the country’s total acreage of farmland stood at 1.826 billion mu in 2010, down from 1.945 billion mu in 1998.
China grants extra quotas for rare earth exports
The Ministry of Commerce announced on May 17 additional export quotas for rare earth minerals totalling 10,680 tonnes, as China.org.cn reported.
Of the added quotas, 9,490 tonnes were light rare earths, and 1,190 tonnes were medium and heavy rare earths, a statement on the MOC website said.
The added quotas would be provided to a total of 12 companies which had recently passed examinations by the Ministry of Environmental Protection, the statement said.
The companies included Baogang Group, the country’s largest light rare earth producer, and the Aluminum Corporation of China, the statement said.
The quotas would be addition to the nation’s first batch of rare earth export quotas, the statement said.
On December 27 last year, the ministry announced the country’s first batch of rare earth export quotas totalling 10,546 tonnes for 11 qualified companies in 2012.
The ministry also noted that companies that had yet to pass the environmental examination would not get the export rights if they failed to meet the second round of environmental examinations before the end of July.
China supplies more than 90 percent of the world’s rare earth metals, but its reserves only account for about one-third of the world’s total.
Comment
Faced with widespread environmental challenges, it is justified for China to set production caps, stricter environmental standards and an export quota system for rare earth metals in recent years to protect the environment and preserve the exhaustible resource.
New platform gives iron ore traders muscle
An iron ore trading platform made its China debut on May 8 as the world’s biggest buyer of the commodity sought to enhance its price-setting influence, according to China Daily report.
Trading volume is expected to reach approximately 100 million tons by the end of this year. This will account for about 14 percent of China’s annual iron ore imports, said Xu Xu, chairman of the China Chamber of Commerce of Metals, Minerals & Chemicals Importers & Exporters, one of the organizers of the platform.
Just a few minutes after its official launch, the platform saw its first transaction with 165,000 tons sold for $145 a ton, including freight. This was in line with market expectations, analysts said.
China, with a leading role in the market, has long argued that it should have a greater say in pricing.
The platform helps it wrest some control from top miners such as Vale, Rio Tinto and BHP Billiton.
The exchange said the platform will offer contracts settled in US dollars and yuan. The exchange will charge a commission fee for both buyers and sellers of 0.125 yuan or $0.02 per ton.
The exchange has said banks and financial firms would not be allowed to participate in a bid to stem speculation, and there will be no trading of derivatives.
Currently, trading in the spot market for seaborne cargoes is done directly between buyer and seller. Global miners e-mail or fax prospective buyers whenever they sell cargoes via spot tenders, a system deemed efficient and free of broking fees.
Traders say unless China offers incentives, such as tax rebates or commission discounts, they are unlikely to migrate to the platform anytime soon.
The platform has more than 150 companies as members so far. Top international mining conglomerates, along with major Chinese steel producers including Baosteel, Hebei Steel and Wuhan Steel, have all signed up as members of the electronic platform op- erated by China Beijing International Mining Exchange.
Zhang Lin, senior researcher of Lange Steel Information Research Center, forecast that the platform will come into its own when it can attract about half of China’s imports.
Angang Steel, which is a member of the platform, will put up to 30 percent of the company’s iron ore for trade on the platform, said Li Daguang, deputy general manager of Angang Group International Trade Corp.
Foreign miners were adopting a wait-and-see approach.
“We believe the new system will bring more transparency because prices are not created by the platform, but reflect real transactions,” said Luiz Meriz, president of Vale Minerals China Co Ltd. “So, we are very supportive.”
Comment
With growth in Chinese demand for iron ore this year slowing, along with the overall economy, the pricing dynamic is changing to China’s advantage, whereas the last few years have very much been a sellers’ market.
Several iron ore exporting countries raised tariffs
It is learned from oversea reports that, Indonesia launched a 20% tariff on 14 mineral products including iron ore since May 6th. It is reported, in addition to Indonesia, other countries will lift tariffs or limit the export of mineral resources. Among them, India, Vietnam will increase iron ore export tariffs, and Australia will levy carbon tax and mineral resource rent tax since July 1st, said National Business Daily.
An industry participant said during an interview with National Business Daily, rising taxes will not only bring a higher cost to Chinese steel enterprises, but also restrain their investments in oversea mineral resources. “China has realized the necessity to invest in oversea mines or acquire ore mining rights, but at the same time, resource protection consciousness in foreign countries is gradually strengthening.”
This is impeding Chinese steel enterprises’ “overseas mine acquisition”. In recent years, to break the monopoly of three leading ore traders, Chinese steel enterprises have tried to diversify the sourcing channel, and made some progress. According to Lange Steel Information Network, although Australia is still a major exporter of iron ore, the first two months of 2012 witnessed an increase of African ores, with the ratio up from 6.04% at the same time in 2011 to 6.95%. Meanwhile, imports of South American ores increased slightly, up from 24.27% to 25.92%.
“As the three leading miners monopolize global iron ore market, China try to break the monopoly by expanding imports of other ores. However, when more and more non-traditional countries begin to limit exports of mineral measures, China will encounter challenges.” Umetal iron ore analyst Tang Jing said.
Comment
With many countries carrying out in succession policies to increase tariffs or restrict exports of certain mineral resources, Chinese steel enterprises will face more challenges in acquiring overseas mines. Therefore, how to avoid foreign policy barriers, and explore oversea market effectively, is the problem facing Chinese steel enterprises.
Oil and other five minerals have an external dependence of over 50%
Beijing Business Today reported that while the foreign dependence of oil and iron ore continue to rise, exports of refined aluminum, refined copper, sylvite and other bulk minerals are increasing because of insufficient “domestic supply”, resulting in an increase of external dependence of bulk minerals in the past 15 years. Minister of Land and Resources, Xu Shaoshi said, the above five minerals all have a foreign dependence of more than 50%. And with the global competition for mineral resources becoming fiercer, the cost and risk of utilizing oversea mineral resources will increase gradually.
Lin Boqiang, director of China Energy Economics Research Center, said, it is a fact that China has a high dependence and demand for foreign mineral resources, and increases in mineral prices in recent years have pushed up the costs for Chinese buyers. Excessive dependence on imports will certainly affect China’s economic security, so it is quite necessary for China to strengthen mining of mineral resources.
Last October, the State Council approved the Prospecting Breakthrough Strategy Platform for Action (2011-2020), making clear the strategic roadmap for prospecting in next 10 years.
Comment
Along with the rapid development of emerging economies, national economic games and global competition for mineral resources will increase, and the costs of utilizing oversea mineral resources rise sharply, so the risk of excessive dependence on imports is higher and higher. China should focus on developing local resources while exploring oversea markets.
Coal conversion in an era of high oil prices
According to China Petrochemical News, the 12th Five-Year Plan for National Energy Science and Technology (2011 to 2015) lists coal processing and conversion as national energy strategy for the first time, providing technical support and assurance for China to further reduce dependence on imported crude oil.
Low oil prices era has gone. Due to geopolitical, debt crisis in Europe and America and other factors, crude oil prices in international market hiked continuously in recent years. Industry experts expect that international oil prices will stay high. China has rich coal but poor oil reserves, and high international oil prices will boost coal conversion into clean fuel, in order to replace petroleum. It has an important strategic significance.
Comment
This move not only reflects the focus on coal conversion, but also suggests that coal conversion and utilization will be a key direction for coal industry in next five years, and that China will continue to increase the input in coal conversion science and technology. The plan especially emphasized energy saving and emission reduction in coal conversion process, which is the key to coal conversion.
Solar insiders upbeat on industry’s future
Solar industry insiders remain optimistic about the sector’s future, despite the recent challenges it has faced from a supply glut and weak demand, China Daily reported.
Shares in solar power companies are falling and some big players have even gone to the wall. But many insiders say they are confident that the market will revive, especially with the growth in Asia and the Americas.
“I believe the market will revive in 12 to 18 months,”Brian Lau, director of DEK Solar, said at the Sixth SNEC PV Power Expo.
Oversupply of polysilicon, a key component in manufacturing solar panels, has been further depressing the price of solar cells. Meanwhile, European countries, formerly big consumers of solar products, are slashing subsidies for the industry due to the financial crisis.
Lau said the production capacity surplus is driving solar prices down, which makes manufacturers suffer. But it will push the industry to go forward, as once prices become lower, there will be more customers.
“After all, the industry cannot always rely on subsidies,”he said.
“It is painful for manufacturers, as the price falls. But it is a good thing, as a lower price means solar will be able to compete with other energies like natural gas or coal. It will become self-sustained,” said Rhone Resch, CEO of the Solar Energy Industries Association, the national trade association of the solar energy industry in United States.
Manz AG, a Germany-based manufacturer of production systems for making crystalline solar cells and thin-film solar modules, established its biggest plant worldwide in Suzhou, an eastern city close to Shanghai.
“Almost all companies are losing money because of overcapacity in the sector across the country, including us,”said Dieter Manz, the company’s founder and chief executive officer.
“But the user market is growing really fast so we still see great opportunities. You need quite some investment to achieve economy of scale, which is notably critical to the industry,” he added.
Due to technological advances, the cost of solar power has substantially lowered so he foresees a quick pickup in demand in the near future, with thin-film solar modules rebounding first, because its potential for cost reduction is far bigger than crystalline solar cells.
Comment
The growth of solar energy in Asia and the Americas and the price falling is good news for solar power companies though they are still suffering from overcapacity.
China’s nuclear industry reeling
Japan’s nuclear emergency of last year has left a mark on Chinese nuclear manufacturers, which have since seen billions of yuan worth of orders postponed, a senior industry official was cited as saying by China Daily.
“Work stalled on 14 of the 27 reactors that were under construction before Japan’s nuclear emergency, causing orders worth 50 billion yuan ($7.9 billion) to be delayed,” said Sui Yongbin, chief engineer of the China Machinery Industry Federation, an industrial organization that represents machinery manufacturers.
The country suspended giving approvals to nuclear projects for 14 months starting on March 16, 2011, in response to the nuclear leak that occurred at a Japanese nuclear plant following the earthquake and tsunami that struck the island country in the same month. Work on recently approved projects was also stalled to give the government time to conduct safety inspections.
Shanghai Electric Group Co Ltd, one of the three largest nuclear equipment makers in China, said it received no orders in 2011.
“China’s nuclear industry was expanding too quickly before the nuclear crisis last year and that will ultimately end in diminished quality,” Sui said.
The engineer also warned that Chinese nuclear manufacturers are now dealing with overcapacity as the world nuclear industry enters a trough, adding that strong competition already exists among Chinese manufacturers.
“Manufacturers can produce 20 pressure vessels every year and they are competing with each other by offering lower prices,” Sui said. “In the meantime, we are still importing certain key components from foreign companies.”
China can manufacture 12 nuclear reactors sets annually whereas the industry needs only 40 sets before 2020, according to Sui.
Comment
Japan’s nuclear crisis has left a shadow over the use of nuclear energy in the world. China is no exception.
Domestic textile shoes and hats export lose USD 5.5 billion due to technical barriers
China Light Textile News reported that on May 14, the General Administration of Quality Supervision released the sample survey data of the impact imposed by the overseas technical trade measures on 2,600 domestic export enterprises. The data indicates that the domestic export textile shoes and hats industry is among the top five industries severely impacted by overseas technical trade measures and the direct loss of the export textile shoes and hats throughout the year stood at USD 5.541 billion, accounting for 8.9% of the total direct export loss. The industrial insiders hold that the Chinese textile shoes and hats export departments and enterprises need to timely take effective measures and positively respond to overseas technical barrier measures in a bid to ensure the healthy export of the domestic textile shoes and hats.
It is learned that in 2011, 35.16% of the export enterprises are impacted by the overseas technical trade measures to different degrees; the direct loss from export reached USD 62.259 billion last year, USD 4.018 billion more than 2010, accounting for 3.27% of the export volume during that period, and 0.42% less than that in 2010; in response to the overseas technical barrier measures, the domestic enterprises spend USD 25.962 billion more, up by USD 1.571 billion over that in the previous year.
The sampling shows that the technical barrier measures implemented by the major trade partners impacting the Chinese industrial products exports can be categorized into five classes—certification requirement, technical standard requirement, limit of toxic and hazardous substances, label identifying requirement as well as packaging and materials.
Comment
Confronted with more impact from various overseas technical trade measures, the Chinese foreign trade enterprises should keep abreast of the latest development and the new regulations of the overseas technical trade measures and timely formulate targeted countermeasures so that the impact on the domestic foreign trade imposed by the overseas technical trade measures can be minimized. In the mean time, relevant governmental departments are supposed to establish sound technical trade barrier warning and speedy reaction mechanism in a move to create favorable conditions for the exports of the domestic enterprises.
Household textile and clothing enterprises seeking new development potential by turning to E-commerce
The Household Textile and Clothing Exhibition was held during May 1 to 5 at the 3rd Session of the Canton Fair. Due to the declining macro economy, in the first three months the household textile industry saw the biggest negative sales growth over the past 10 years. Stepping into such a trough, how can the domestic household textile export enterprises react? At the Canton Fair, the reporter found in interviews that some traditional household textile enterprises began to turn to e-commerce. The domestic export enterprises need to address the industrial dilemma by transformation and upgrading through channel innovation.
Shanghai Homes Household Textile Co,. Ltd. (hereinafter referred to as Homes), well known as China’s “supermarket king” in the domestic household textile sector, begins to fully enter e-commerce sales. On the occasion of the opening of the 3rd Session of the 111th Canton Fair in early May, Dong Fulong, President of Homes and Vice Chairman of Shanghai Household Textile Products Association, announced that Homes reaped RMB 10 million from online sales in April, achieving sales channel transformation and upgrading. Dong said that so far Homes had successfully combined online sales with offline sales and in future supermarket supply and export OEM ratio will decrease, while online sales will increase to account for a ratio of around 50%.
Industrial insiders point out that at this year’s Canton Fair, Homes, the “supermarket king” in the Chinese household textile announced in a high profile its launching into e-commerce along with its operation objective, which undoubtedly has landmark implications in the household textile sector. This signals that the domestic textile sector begins to accelerate sales channel transformation and upgrading and that the household e-commerce era has already come.
At the 111th Canton Fair, the gloomy industrial situation made many household textile enterprises feel stressful and begin to turn to e-commerce so as to respond to industrial changes. Such brands as Lovo and Fuanna have opened their own B2C e-commerce business and set up flagship shops on Jingdong and Taobao shopping platform. It is an inevitable trend for the household textile enterprises to nudge into online sales on a full scale.
Comment
Entering e-commerce provides more potential market for the traditional household textile export enterprises and in the upcoming years, the proportion of e-commerce sales volume of the household textile industry will gradually rise to 10% in the entire sales volume. In more years to come, the proportion may jump to 50%.
China readies more incentives for EV development
China, the world’s biggest emitter of greenhouse gases, said it will take additional steps to promote development of electric cars and plug-in hybrids, according to Bloomberg report.
The government will broaden pilot programs, build recharging facilities and develop a plan to recycle batteries, the State Council said in a statement on its Web site in April.
The subsidies are part of the government’s drive to have 500,000 such vehicles by 2015, rising to 5 million units by 2020.
“This clarifies the direction for all participants, carmakers, consumers and regulators,” said Thomas McGuckin, the Shanghai partner who oversees the Asia Pacific automotive practice at PricewaterhouseCoopers. “The price point, infrastructure and consumer usage patterns ultimately will determine adoption.”
General Motors and Volkswagen AG have announced plans to introduce EVs and hybrids in China, which seeks to cut smog and its reliance on imported oil. BYD Co., the Chinese carmaker partly owned by Warren Buffett’s Berkshire Hathaway Inc., this week will introduce the first EV model developed by its venture with Daimler AG.
The State Council said in the statement that development should be built on existing production capacity and that the industry should guard against “blind, low-quality investment and wasteful construction.”
The government wants to lower the average fuel consumption of passenger cars to 5 liters per 100 kilometers by 2020, according to the statement.
Government subsidies
Buyers of energy-efficient cars in Shanghai, Shenzhen and four other Chinese cities qualify for a 60,000 yuan ($9,500) subsidy.
This has happened even though the central government offers a paltry 3,000 yuan ($475) subsidy for conventional hybrids. By contrast, the government offers subsidies up to 60,000 yuan for an electric car and 50,000 yuan for a plug-in.
Electric-car sales in China are forecast to exceed those in the United States by 2020, Boston Consulting Group Inc. said in a report last June. Such cars may account for as much as 7 percent of total auto sales in China, the world’s largest vehicle market, by 2020, Boston Consulting said in the report.
China imports more than half of its crude oil consumption, and it is the world’s second-largest importer of oil after the United States, giving it incentive to encourage use of more fuel-efficient vehicles.
The country also is trying to reduce smog. Air quality in all of the 32 Chinese cities that track pollution falls short of World Health Organization guidelines, with Beijing among the world’s most polluted cities.
GM, the largest foreign carmaker in China, introduced its Chevrolet Volt plug-in hybrid car in the country on Nov. 21. The Volt will complement an all-electric car that GM is developing with its Chinese partner, SAIC Motor Corp., the automaker said.
Volkswagen plans to mass-produce EVs in China in 2018, VW China CEO Karl-Thomas Neumann said on Feb. 14. Nissan Motor Co., which leads Japanese carmakers in China sales, plans to export its all-electric Leaf car to the country for fleet sales, Nissan said in last September.
Comment
It is Chinese government’s goal that China would be the world’s largest EV market. However, it is still far away from the target. China ranked fifth globally behind Japan, the United States, France and Germany in the adoption of batterypowered vehicles, falling from third place in 2010, according to a McKinsey & Co. report released April 20.
A lack of consumer demand, limited models and inadequate charging stations were other reasons contributing to the decline, McKinsey said. Also, China built about 16,000 charging points last year, less than 5 percent of the government’s 2015 target for 400,000 charging stations, according to McKinsey.
“Consumer sales of electric vehicles in China face the same obstacles as in the United States: high prices, limited driving range, and an inadequate recharging infrastructure.” said Alysha Webb, a former China correspondent for Automotive News.“In the near future, most of those EVs will be owned by the government fleets, not consumers. It’s unclear when, if ever, Chinese consumers will warm to electric vehicles,” Webb said.
China’s wine investment market cools down
China, the world’s fifth largest wine consumer, has shown the sign of a cooling wine market, the Oriental Morning Post reported on May 14.
Shanghai, China’s main distribution center for imported wines, have seen declining wine imports for five consecutive months, Xinhua News Agency reported.
The Shanghai Customs District imported 29.63 million liters of wine in the first quarter of this year, and the average price dropped to $9.8 per liter. March imports were 7.35 million liters, a month-on-moth decrease of 11.3 percent according to the Xinhua report.
By contrast, in the second half of last year, the domestic wine market was extremely hot, and the average price reached$11.6 per liter.
According to industry insiders, China’s wine market is returning to rational, said the Oriental Morning Post report.
Affected by the cooling high-end wine investment market, prices of products from Chateau Lafite Rothschild, a topnotch French vineyard plummeted. As of May 8, the bonded price of a 2008 Lafite product tumbled 53.4 percent to 7,230 yuan ($1,143.79) from 15,500 yuan and the bonded price of a 2004 Lafite product fell to 2,850 yuan from 4,900 yuan.
The report also quoted Wang Jiaqi, business development director of Shanghai Wine Exchange, as saying that before February 2011, prices of Lafite products had been skyrocketing, with buyers from China being an important force for its boom.
According to previously published data from the French Bordeaux Wine Industry Associations in 2010, China replaced the United Kingdom and Germany for the first time to become the largest importer of Bordeaux wine in 2010.
Comment
China’s booming wine market is returning to rational after the market frenzy.
China’s e-shopping market to top world in 2013
The transaction size of China’s online shopping market will surpass Japan in 2012, and exceed the United States by 2013, becoming the world’s largest online trading market, reported Economic Information Daily on May 17.
The report cited the China Business Development Report Forecast (2011-2012) released by the National Academy of Economic Strategy of Chinese Academy of Social Sciences (CASS).
The report noted that even if China becomes the world’s largest online trading market in the next year, the thriving online shopping market is not enough to cover up problems in the general Chinese circulation industry.
According to Jing Linbo, vice-president of the National Academy of Economic Strategy of CASS, the fundamental reason lies in unclear positioning of China’s circulation industry.
He stated that other problems include market segmentation, enterprises scattered with low concentration, a less competitive market, a lack of theoretical research to guide the practice, and the need for improvement of personnel training.
Comment
Though the online shopping market is thriving in China, it has to confront with many problems, include those in the circulation industry.
China’s online third-party payment booms in Q1
China’s online third-party payment market reached 758.3 billion yuan($120.49 billion) in the first quarter of 2012, a major tech and Internet information provider was quoted as saying by Xinhua on May 7.
The figure represents a 90.9 percent year-on-year increase, and 2.7 percent increase compared to the last quarter of 2011, according to the results of a seasonal survey of China’s online third-party payment market conducted by Analysys International.
The quarter-on-quarter decline in the industry’s growth rate was due to the holiday season and the overdrawn consuming ability in the previous year-end sales promotion, said Zhang Meng, an analyst with the firm.
Comment
The burgeoning online shopping drives the growth of thirdparty payment.
Foxconn builds Chinese mainland headquarters in Shanghai
Xinhua reported on May 10 that the Foxconn Technology Group, a main supplier of electronic components for Apple, started construction on its Chinese mainland headquarters in Shanghai.
The headquarters, located in the Lujiazui financial district, will function as a research and development center and facilitate the company’ step toward a new business model, Gou said, adding that the company also plans to set up an ebusiness center in Shanghai’ Minhang district.
Foxconn is the world’ largest maker of computer components and is responsible for assembling products for Apple, Sony and Nokia.
Comment
The construction of the headquarters represents a shift for the company, as it will focus more on the domestic market and less on exports.
ZTE sets its sights on Europe
According to China Daily on May 1, ZTE Corp plans to strengthen its position in the European market in the fields of telecom infrastructure, smart phones and government and enterprise solutions, according to company officials.
Since being established in China’s southern coastal cityShenzhen in 1985, ZTE has grown into a telecom-hardware giant, the fourth-largest mobile phone maker by shipments and fifth-largest telecom equipment maker by sales - competing with the likes of Sweden’s Telefon AB L.M. Ericsson and Paris-based Alcatel-Lucent.
Because of a global decline in telecom carrier spending on network construction, ZTE diversified its core businesses in recent years to explore new markets, such as mobile phones and enterprise IT solutions.
Last year, its overseas revenue was nearly RMB 47 billion (US$7.5 billion), 54.2 percent of its total revenue. The European and North American market grew the most last year, 42.2 percent year-on-year to RMB 20.45 billion.
With nearly one-fourth of its revenue coming from Europe and the US, it has become increasingly dependent on the growth there, Dai Shu, director of corporate branding and communications at ZTE, said.
“ZTE aims for a steady increase in market share in European countries,” Dai said. The European market is mature and well-regulated. Meanwhile, many European-based telecom operators, such as Telefonica and France Telecom, conduct business globally, and may introduce extensive business opportunities for ZTE.
“Since European-based telecom carriers combined occupy more than half of the world’s telecom network market, ZTE will benefit in the short and long run from cooperation with those multinational operators,” Dai said.
As early as 2000, ZTE had set up offices in various European countries. However, they didn’t really take off until 2006 to 2007, when it finally won the trust of the major European telecom carriers.
ZTE employs around 1,000 people in Europe, more than 60 percent of whom are citizens of the countries where they work.
ZTE’s telecom system equipment has been imple- mented by nine of Europe’s top 10 operators, according to its 2011 financial report. The company is also seeking to provide telecom operation services to European customers, said He Shiyou, ZTE’s executive vice-president, at the company’s annual analyst conference in Shenzhen last month.
But ZTE’s most notable business in Europe remains in consumer devices. It was the world’s fourth mobile phone vendor in the fourth quarter last year, shipping 18.9 million units, according to research firm Gartner Inc.
It could be shipping 100 million smart phones a year by 2015, according to Reuters. Europe will be a major target market for its mid-level to high-end smart phones as it tries to reverse a decline in its gross profit margin, He said.
“We’ll do more promotions for our mobile phones in Europe this year,” Dai said. ZTE is boosting advertising because many European consumers still know little about the company.
By cooperating with local carriers, it has secured about a 10 percent share of the mobile phone market in many European countries. Sales of the Blade 880, a ZTE entry-level smartphone, have approached 10 million units worldwide since it debuted in the United Kingdom in late 2010.
ZTE’s third focal point in Europe is said to be the government and enterprise businesses, specifically, in telecommunication and IT solutions to clients from governments and the energy, transportation and education industries.
Xu Ming, ZTE vice-president, said the company is aiming for more than US$6 billion in government and enterprise business sales by 2015, up from $1.6 billon last year. Overseas markets are likely to contribute more than 60 percent of its total government and enterprise business sales by 2015, he added.
Comment
The construction of the headquarters represents a shift for the company, as it will focus more on the domestic market and less on exports.
Short films show strong life during fair
More than 1,000 short films from the Chinese mainland and overseas were assembled in Shenzhen, Guangdong province, on May 17 and 18 for the third China International New Media Shorts Festival and KingBonn Award Competition, China Daily reported.
The annual event, put on by the State Administration of Radio, Film and Television and the Shenzhen government since 2010, attracted almost 30,000 short films from 63 countries this year. Awards in 11 categories will be given to the best of them, going to the films deemed to be the best dramas, animations and documentary shorts, among other superlatives.
The biggest award will go to “the Best Short” and will come with 300,000 yuan ($47,000) in prize money.
Beyond winning awards and gaining international exposure, film producers who attend the event are also looking for business opportunities.
Zheng Dingwen, deputy general manger of Shenzhen Media Group, the main organizer of the festival, said, “I have a feeling that people came last year just to be onlookers but this year have come with more real intentions to buy. The potential buyers are mainly traditional TV stations, big video websites, and the most popular products are short dramas and animations.
“Short films are a new offering and have only become popular in the last two or three years, but the future for them is very bright. It’s a trend that is keeping up with changes in our lives.”
Zheng said China Mobile in 2010 introduced a program called GkerGshooting, which allows subscribers to shoot videos using their mobile phones and then upload them. The program generated 5 million yuan in revenue in its first year and more than 60 million yuan in its second.
“It (the film festival) presents a good opportunity,” said Li Xusheng, general manager of Shenzhen BOX Digital Animation.
For a second year in a row, he has come to the festival to promote his short 3D animations, which he makes money from by implanting ads in them.
“Several companies and organizations contacted me after the event last year with the intention of cooperating, including some from France and Hong Kong,” he said. “They want to sell their short films through our channel.”
Comment
In the fast-paced society, the appearance of short films satisfies people’s various needs with their flexibility.
Animation industry “still lagging”
The animation and cartoon industry is booming in China but experts say there is still a long way to go before it will make a big impression on the international market, according to a China Daily report.
A total of 260,000 minutes of animation material was produced in the country in 2011, an increase of 18 percent from 220,000 minutes in 2010, according to the State Administration of Radio, Film and Television. The growth is almost twice as much as the increase in China’s gross domestic product last year of 9.2 percent.
However, experts said the gap between Chinese and foreign markets remains huge and the domestic development is not only constrained by lack of talented and creative people but also the absence of a complete industrial chain.
“We have seen significant growth in quality and quantity of the made-in-China products. However, there is a long way to go to before the nation can take a strong role in the international market,” said Jin Delong, director of the publicity management department at the State Administration of Radio, Film and Television during the 8th China International Cartoon and Animation Festival.
The festival is the largest of its kind in China and involves seminars and exhibitions. It is held annually in Hangzhou, Zhejiang province. This year’s event ended on Thursday.
“Many products can be further improved in terms of content and design. Currently we have very few products that qualify as special. Many are mediocre,” Jin said.
In 2011, the cartoon and animation industry garnered a revenue of 60 billion yuan (9.52 billion U.S. dollars). In contrast, the sales reported by Walt Disney Co reached 40 billion U.S. dollars last year.
Experts said the lack of a complete value-making chain has become problematic for Chinese animation and cartoon makers seeking profitability. Currently, many companies expect profits to come from broadcasting.
Comment
China is a large country of animation works, but not a strong one. To speed up the development of this industry, a complete value-making chain is necessary.
China to buoy QFII inbound investment more aggressively
According to Xinhua on May 20, China will grant investment quotas by overseas funds in its domestic securities markets in a more swift and aggressive way before the country fully opens up its capital market with a convertible currency, according to the foreign exchange regulator.
The State Administration of Foreign Exchange (SAFE) will adopt fast-track procedures to approve investment quotas by medium- and long-term overseas funds, such as investment funds with foreign government background, overseas pension funds and insurance capital, the SAFE said in a statement on its website.
All overseas investment funds will be approved under the scheme of the Qualified Foreign Institutional Investor (QFII), which is launched in 2002 by the Chinese government to allow licensed foreign investors to buy and sell the A-shares when capital accounts are still controlled in the country.
To encourage the inflow of overseas investment funds, the SAFE promised to allocate more quotas for those mediumand long-term QFII funds when they first apply, while appropriately simplify the management process of foreign currency and Renminbi capital accounts.
The SAFE’s bolder move came after the State Council, or China’s Cabinet, hiked the country’s total QFII quotas from previously 30 billion U.S. dollars to 80 billion dollars last month.
According to the QFII scheme, the China Securities Regulatory Commission grants QFII licenses and market access to foreign investors, while the SAFE approves quotas for individual QFII funds.
“The QFII operations over the past 10 years showed the scheme is an important measure to facilitate the open-up of our capital market and promote the yuan’s convertibility,” Sun Lujun, director of the Capital Account Management Department with the SAFE.
Investment quotas totaling 26.01 billion U.S. dollars for 138 QFII funds have thus far been approved in China as of last week, according to SAFE data.
Comment
QFII scheme has played an active role in helping improve China’s institutional frame work, investment concept, corporate governance, risk control, technologies and custodian and brokers’ service quality.
New yuan lending drops, monetary loosening expected
Xinhua reported on May 11 that Chinese financial institutions lent less-thanexpected new loans in yuan in April as the economy continued to slow, strengthening expectations for further monetary loosening.
New yuan-denominated loans reached RMB 681.8 billion (US$108.2 billion) in April, down RMB 61.2 billion compared with a year earlier, China’s central bank said.
The figure was far below market estimates of around RMB 800 billion, following weak monthly data on investment, industrial output and consumption released.
April’s yuan lending was also the lowest this year, compared with RMB 1.01 trillion loaned in March, RMB 710.7 billion in February and RMB 738 billion in January, according to the People’s Bank of China (PBOC).
Financial regulators should unleash liquidity, drive down market interest rates, reduce corporate financing costs and speed up bank lending.
China’s imports edged up only 0.3 percent year-on-year in April while exports climbed 4.9 percent, both well below market estimates.
Urban fixed-asset investment rose 20.2 percent from the year before in the first four months, the slowest pace since the 17.4 percent growth recorded in 2002, the National Bureau of Statistics (NBS) said.
In April, industrial value-added output grew 9.3 percent year-on-year, its lowest pace in nearly three years, while retail sales climbed 14.1 percent, lower than the 15.2-percent increase in March.
The PBOC reiterated its stance of maintaining a prudent monetary policy in the months ahead, saying inflationary risks still deserve attention.
Analysts expect more reductions in the reserve requirement ratio for banks in the short term and interest rate cuts in the second or third quarter, but note that the central bank remains wary of price rebounds.
China’s consumer price index, a main gauge of inflation, rose 3.4 percent year-on-year in April, easing slightly from the 3.6-percent rate registered in March, the NBS said.
Comment
Of the new yuan lending, medium- and long-term loans now account for less than 25 percent, well below the 50 percent level in previous years, showing large companies’ borrowing demand has shrunk markedly.