Friday, August 29, 2014

Why China is not competing with the west for Africa - Howard French

Howard French
+Howard French 
China and the West are heavily competing about access to Africa, if we may believe many media reports. But that is a gross simplifications of what is really going on, says author Howard French, China's Second Continent: How a Million Migrants Are Building a New Empire in Africain the Mail&Guardian.

The Mail&Guardian:
The widely covered United States-Africa Leaders Summit earlier this month led to talk of the US awakening to the “threat” of China’s advance into Africa, and how Washington will have to play catch-up, with the $33-billion headline investment figure announced by President Barack Obama being compared with the figures linked to Beijing in recent years.
This perception is a “gross oversimplification”, says Howard French, the author of China’s Second Continent, an eye-opening book that details how a million Chinese migrants are building a new empire in Africa.
The idea that China’s big recent successes – which have led to the “Look East” policy that is a favourite of African leaders – have come at the expense of the West are largely untrue, French says in an interview with Chinaherald.net, citing the way in which the global economy is segmented and increasingly specialised.
“The goods that China is selling are generally not mainstays of Western commerce any more,” says French.
“I would also say that China has large, inherent competitive advantages in infrastructure and public works, because of the scale of infrastructure building in China, and because of the low cost of capital there, and that much of the business it is winning in Africa in this sector isn’t so much being taken away from anyone as it is being allocated rationally.”
More in the Mail&Guardian.

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Land sales: burden for rural residents - Sara Hsu

Sara Hsu
+Sara Hsu 
When the Hu-Wen government abolished the agricultural tax, everybody sang high praise. But it robbed local governments from their only source of income, apart from land sales and its corrupt practices. The National Audit Office is now trying to correct some of those wrongdoings, writes financial analyst Sara Hsu in Triple Crisis.

Sara Hsu:
Land takings by government officials have had a highly negative effect on rural residents.  In the past decade, the practice of rural land grabs and resales worsened the predicament of farmers, whose only asset is land.  This issue has ignited protests throughout China in recent years, even leading in some cases to self-immolation.  Rural residents who have lost their land in this process have found themselves plunged into the ranks of the urban unemployed, with even lower standards of living and a bleak future. 
The Chinese leadership has attempted to resolve this problem by giving farmers rights to their own land.  However, despite the imposition of laws that have attempted to protect farmers’ rights (including the Land Management Law of 1993, the CPC Notice on Rural Land Contracts of 1997, the Rural Land Contracting Law of 2002, the Property Law of 2007, CPC Decisions on Rural Reform of 2008, CPC Opinions on Farmers’ Incomes of 2009, and CPC Opinions on Balanced Development od 2010), land-stripped farmers actually have little legal recourse. In practice, land “rights” are balanced against the “public interest” within the scope of the law.  Still-unclear property rights have left the door open to blatant “land grabs” by local officials. 
It is hoped that the National Audit Office will uncover some offenses by local officials who used land sales to enrich themselves, but this will not correct the underlying incentive for local governments to use land as an important source of supplementary income and collateral.  In order to remove this incentive, particularly since rural residents have so much to lose because of it, China’s fiscal system needs to be revamped, with more revenue flowing back to local governments from the central government or fewer fiscal burdens on local governments.
At the minimum, the practice of using land use rights as collateral should be banned, and the onus should be placed on local governments to adequately compensate farmers for undeveloped land.  Without these basic requirements, local officials’ abuse of rural land will likely persist.
More in Triple Crisis.

Sara Hsu is a speaker at the China Speakers Bureau. Do you need her at your meeting or conference? Do get in touch or fill in our speakers´request form.

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Thursday, August 28, 2014

Online shopping: potential and concerns - Sara Hsu

Sara Hsu
+Sara Hsu 
Chinese consumers bought US$176.1 billion worth of goods online in the first half of 2014, almost 10% of all retail sales. Great potential, writes financial analyst Sara Hsu in The Diplomat, although there are also major barriers for its development.

Sara Hsu:
However, two major barriers to rapid expansion of online sales exist. One of the problems is the presence of counterfeit goods. Recently, online retailers Jumei, JD.com, and Amazon.com were forced to delist fake beauty products sold through a third party on their websites. Because of this issue, luxury brands have faced difficulty in increasing sales online, and some online luxury shops have even gone out of business. Websites have attempted to combat this problem through several channels. Sellers are required to post their personal information; when this is unavailable, trademark infringement can be pursued online via an inquiry through Internet Service Providers. Mediation and litigation can be pursued, but they are time consuming and costly. 
The second major barrier to rapid expansion of internet sales is the presence of low profit margins. Profits continue to be scarce, and e-tailers, including Yihaodian and Toto, admit they are in the red. Alibaba’s profits stem not from sales but from advertising revenue. Worse, China’s State Administration of Taxation may impose a tax on online sales in the near future. There continues to be debate over whether small and midsize sellers should be taxed at a rate equal to that of large sellers, and how to tax small retailers that are often unregistered. A tax on online sales would further reduce the potential for profits in the fledgling industry and may result in a less attractive industry for foreign and domestic e-tailing sites alike. 
China’s online shopping sector is still nascent and has significant scope to grow. If appropriate institutions are put into place that increase trust between buyers and sellers, enhance profits among sellers, and continue to attract new sales, the industry may be a surprise performer in China’s push to expand consumer spending.
More in the Diplomat.

Sara Hsu is a speaker at the China Speakers Bureau. Do you need her at your meeting or conference? Do get in touch or fill in our speakers´ request form.

Are you looking for more financial experts at the China Speakers Bureau. Do check out this recently updated list. 

Wednesday, August 27, 2014

Dairy tie-up Fonterra-Beingmate win-win - Ben Cavender

Ben Cavender
+Benjamin Cavender 
The 2013 Fonterra milk scandal has not diminished the aspirations of the New Zealand firm to play a role in China´s dairy industry. This week Fonterra bought 20% stake in Beingmate, a smart move, says retail analyst Ben Cavender to Reuters.

Reuters:
"Beingmate have pretty good distribution and are definitely known in the market, so this is probably going to help Fonterra," said Ben Cavender, a Shanghai-based principal at China Market Research Group.
"It could be a big money maker for them but they are also coming into a very competitive market now with consumers that are much more savvy than they were three, four years ago."
More at Reuters.

Ben Cavender is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch. 

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Monday, August 25, 2014

How China becomes an innovative country - Shaun Rein

Shaun Rein
+Shaun Rein 
Innovation and China have not been an obvious combination of the past few decades. US vice-president Joe Biden even challenged us to name any innovation from China. Business analyst Shaun Rein takes Biden on in his upcoming book The End of Copycat China: The Rise of Creativity, Innovation, and Individualism in Asia.An interview with CKGSB.

Shaun Rein:
Because there is so much low-hanging fruit in the marketplace there is really no need to innovate. So rather than being a government, regulation, [or] cultural problem, the issue is that there [had been] no need to be innovative. If you [were] well connected in the 1990s, you could get a plot of land for below market price and put up a skyscraper; you could go out and get a monopoly delivering wine to a ministry and you could make tens of millions of dollars on very low-end production. There [was] simply no need to innovate. Entrepreneurs had to be very shortsighted because of the market condition on the way to make money. But that’s all starting to change now. What we started to see in the last two to three years is that [the] low-hanging fruit is starting to disappear. It’s still there, but it is starting to disappear. It’s not quite so easy to make money anymore. 
The market is maturing, competition is going up, and companies are moving up to value chain. So a lot of entrepreneurs say: “How do we stay ahead? How do we beat the competition?” Now it’s not about low cost. It’s not about sales and distribution. It’s about… innovation. That’s one major part of why you are seeing the shift from a low-cost copycat, business environment to an innovative environment—they have to [change] in order to survive.
More in GKGSB.

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Friday, August 22, 2014

Fast food chains struggle for the Chinese customer - Ben Cavender

Ben Cavender
Ben Cavender
When US fast food chains entered the China market, they mostly kept rigorously to their American diet. But now they are struggling to gain share of the US$100 billion market by experimenting frantically with tastes and flavors, tells retail analyst Ben Cavender in CNNMoney.

CNN Money:
There's just one problem: double cheeseburgers and pepperoni pizzas aren't exactly typical Chinese cuisine. As a result, the chains are constantly looking for ways to appeal to the local population, while keeping signature items on the menu.
"The trick is, they want to keep as much of their DNA as possible in terms of having core menu items that are recognizable in any market, but also figuring out what the hero products for the specific market are going to be," said Ben Cavender of China Market Research.
McDonald's in Hong Kong, for example, serves noodles, fresh corn and lychee punch. KFC offers rice with its fried chicken meals....
 
Pizza Hut offers lobster bisque and mussels stewed in white wine. The restaurant is a popular spot for teenagers to spend a romantic evening.
 
These are "nicely-decorated sit down restaurants," Cavender said. "In most cases, people going tend to be white collar -- comparatively speaking, these restaurants are still quite expensive compared to a street corner noodle shop."
More in CNN Money.

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Thursday, August 21, 2014

Where are China´s tourists turning to? - Wei Gu

Wei Gu
+Wei Gu 
 Hong Kong is loosing its attraction for Chinese tourists. Where are they now going to, wonders WSJ wealth editor Wei Gu in a discussion with Francis Belin from Swarovski. Both Tokyo and Seoul are doing better, but since 96% of the mainland Chinese still do not have a passport, there is room enough for growth, also in Hong Kong.

Wei Gu is a speaker at the China Speakers Bureau. Do you need her at your meeting or conference? Do get in touch or fill in our speakers´ request form. 

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Wednesday, August 20, 2014

Trend: foreign firms moving out of China? - Sara Hsu

Sara Hsu
+Sara Hsu 
Anti-trust actions, anti-corruption drives and safety issues have made corporate life for foreign firms in China tougher than 10, 15 years ago. Whether they will actually leave China in larger numbers depends on how the costs of doing business develop, writes financial analyst Sara Hsu in the Diplomat.

Sara Hsu:
Many international corporations have now been caught up in the probe. In several high-profile cases, the National Development and Reform Commission and the State Administration for Industry and Commerce have investigated Microsoft and Mercedes-Benz, and looks set to fine Audi and Chrysler for monopolistic pricing. Apple, Microsoft and Symantec products have been banned from sale to government officials. KFC and McDonalds have been caught up in a scandal regarding food safety issues, in which a supplier was exposed for providing rotten meat to the foreign food chains.
The first antitrust enforcement against multinationals occurred in October 2012, as Nike was fined for price fixing. Carrefour was fined in December 2012 for false advertising. In January 2013, the National Development and Reform Commission fined LCD panel manufacturers, including Samsung and LG of Korea. It was reported that the NDRC applied continuous pressure in its investigation of these firms, while allowing the firms to confess to legal violations. The companies ended up complying with the NDRC.
The crackdown on multinational investigations picked up speed last summer. GlaxoSmithKline was investigated on charges of corruption starting in June 2013, while at the same time Mead Johnson Nutrition Co. and Danone were probed for price fixing. Additional firms investigated include Johnson and Johnson (price fixing), Weatherford International (corruption), Avon (corruption), Fonterra (food safety), and Qualcomm (monopolizing the market), among others. Fines may be levied at up to 10 percent of a firm’s annual revenue...
An uncertain business environment coupled with rising wages have created an unattractive business environment for multinational firms. Already, the trend for foreign firms to move overseas is gathering momentum. As China moves up the value chain, from a focus on low-skilled manufacturing to a focus on high-skilled manufacturing and services, it has become more expensive for manufacturers of low-skilled products to operate in China. As a result, textile manufacturers have moved to Cambodia, while other manufacturing firms, including Foxconn, Samsung, Toyota, and Tata Motors have moved to Indonesia. A scandal-fraught business environment for multinational firms is likely to speed up this process.
If anything can be concluded from all of this, it is clear that multinationals no longer enjoy the preferred status that they did ten or fifteen years ago. Wages are rising, the legal enforcement environment is tougher, licensing procedures have become more difficult, the price of raw materials is rising, transparency is low, and local Chinese businesses are becoming more competitive. Where multinationals will choose to focus their production will depend on whether or not it is, on the whole, too costly to do business in China going forward.
More in the Diplomat.

Sara Hsu is a speaker at the China Speakers Bureau. Do you need her at your meeting or conference? Do get in touch or fill in our speakers´ request form.

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