Quantcast
Channel: Business Spectator - China
Viewing all 2267 articles
Browse latest View live

Taiwan's Hon Hai Q2 net profit up 19%

0
0

Taiwan's tech giant Hon Hai Precision Industry, a major supplier to Apple, says its net profit in the three months to June has risen almost 19 per cent.

Net profit in the second quarter was $Tw20.19 billion ($A722 million), compared to $Tw16.98 billion in the same period the previous year and $Twe19.54 billion in January-March.

Hon Hai -- the parent company of Foxconn in China -- said in a statement on Wednesday that sales in the second quarter eased to $Tw879.1 billion, down 1.8 per cent year-on-year.

Hon Hai is the world's largest computer components manufacturer and assembles products for Apple -- including the iPhone -- as well as Sony and Nokia.

It employs about one million workers in China, roughly half of them based at its main facility in the southern city of Shenzhen.

But with Apple diversifying its supply chains, Hon Hai has been branching out into other businesses, including providing 4G telecom services in Taiwan and investing in a South Korean information technology services provider.

Author

Quick Summary

World's largest computer components manufacturer says its net profit in the three months to June has risen almost 19 per cent.

Associated image

Media

Categories

Primary category

Status

Published

Content Channel


Worries over China growth as lending falls

0
0

China's bank lending plunged in July as the weakening property sector hit demand for loans, statistics showed as other key indicators slowed, raising concerns for growth in the world's second-largest economy.

Domestic banks' new yuan loans amounted to 385.2 billion yuan ($62.5 billion) last month, the People's Bank of China (PBoC) said in a statement, a drastic decline from June's 1.08 trillion yuan.

Signs of strength in China's economy have been tempered by nagging worries over the potential for a downturn in the huge property sector to dampen growth.

An official of the PBoC, China's central bank, attributed the fall in lending to the real estate market "undergoing some adjustments" and "downward pressure in the domestic economy".

An independent survey of Chinese property prices showed their decline accelerated in July, dropping for the third straight month.

China's economy grew a stronger-than-expected annualised 7.5 per cent in the April-June quarter, accelerating from 7.4 per cent during the first three months of the year, which was the worst since a similar expansion in July-September 2012.

ANZ Bank economists Liu Li-Gang and Zhou Hao said the July lending data was a significant cause for concern.

"It means that the financial system is engaging (in) a rapid deleveraging process, which could have significant repercussions on the real economy," they wrote.

"Such a sharp drop in credit is in fact a quantitative tightening, which will lead to high interest rates and endanger China's macroeconomic objective."

UBS economist Wang Tao, however, said the drop could be explained by factors including strong deposit and credit growth recorded in June, a crackdown on so-called shadow banking and weak credit demand in the real economy.

"We do not believe these data reflect a credit tightening" by the PBoC, she said in a note.

China's importance as a global growth engine was underscored by figures earlier in the day showing that Japan's economy - the world's third largest - shrank an annualised 6.8 per cent in the April-June quarter after a sales tax increase doused spending.

Industrial production, which measures output at factories, workshops and mines, rose 9.0 per cent year-on-year in July, the National Bureau of Statistics (NBS) said.

Retail sales increased 12.2 per cent in the same month, the NBS said, while fixed-asset investment, a measure of government spending on infrastructure, rose 17.0 per cent year-on-year in the first seven months.

The industrial output figure marked a slowdown from the 9.2 per cent recorded in June but matched the median 9.0 per cent increase predicted in a survey of 15 economists by The Wall Street Journal.

Retail sales growth, meanwhile, slowed from 12.4 per cent in June.

Fixed-asset investment - which is only released cumulatively - came in below the 17.3 per cent reading for the first six months of the year in June, and also below the median 17.3 per cent forecast.

Author

Quick Summary

Signs of strength in China's economy tempered as other key indicators slow.

Associated image

Media

Categories

Primary category

Status

Published

Content Channel

EU urges China to ease pressure on foreign firms

0
0

The European Union Chamber of Commerce urged China to ease action taken against foreign companies and to impartially impose corporate laws to boost competition in the country.

The call comes as foreign businesses have come under pressure in China, where regulators are attempting to level the corporate playing field by using antitrust laws against multinational companies. The auto sector in particular has been under government watch, with regulators launching probes of anticompetitive behavior.

The European Union Chamber said in a statement Wednesday that it has heard "alarming" accounts from European companies that intimidation tactics are being used to force companies to accept punishment without full hearings. Chinese authorities are advising companies not to challenge investigations or seek legal or government assistance, the statement said.

"Competition law should not be used as an administrative instrument to harm targeted companies or serve other aims, such as administratively forcing price reductions," said the chamber, which represents 1,800 member companies in China.

The European Chamber said in its statement it supports China's goal to correct market problems but that government deregulation would be preferable.

China has said it treats domestic and foreign companies equally. The Ministry of Commerce and the National Development and Reform Commission didn't respond to requests for comment to the European Chamber's statement.

Several China-based foreign economists echo the call to ease restrictions and probes of foreign companies, stating that Chinese authorities should be working to chip away at policies favoring state-owned companies, which have a larger stronghold on pricing in the economy.

"The best thing Beijing can do to help the private sector is to take an ax to the bloated, inefficient and graft-ridden state-enterprise sector, and shatter the glass ceiling that prevents private firms from becoming the dominant players in any industry other than the Internet," Arthur Kroeber, of Beijing-based consultancy Dragonomics, said in a report.

In recent months, Chinese antitrust officials have employed a six-year-old antimonopoly law to put foreign businesses under increasing pressure, launching probes of companies ranging from car makers Audi AG and Daimler AG 's Mercedes-Benz to technology companies Microsoft Corp. and Qualcomm Inc.. Authorities haven't always disclosed what they are investigating, but they have compelled many companies, such as Mercedes-Benz, Audi and Tata Motors Co.'s Jaguar Land Rover PLC, to cut prices.

Many say China's regulators are responding to greater awareness that the prices in the country are a burden for consumers and that many goods are often sold at higher prices in China than outside the country. Past government probes, such as in the infant-formula industry last year, resulted in companies lowering their prices.

Some in the Chinese business community say that the government's actions are justified. "Nearly every government looks to protect its own country's businesses," said Sheng Jiemin a law professor at Peking University.

Author

Quick Summary

Auto makers in particular have faced anti-competitive probes.

Associated image

Media

Categories

Primary category

Status

Published

Content Channel

China's July auto sales up by 6.7pc

0
0

Auto sales in China, the world's biggest car market, accelerated in July, growing by 6.7 per cent to 1.62 million vehicles, an industry group says.

For the first seven months of 2014, auto sales reached 13.3 million vehicles, the China Association of Automobile Manufacturers said in a statement, up 8.2 per cent on the same period last year.

China has become critically important to foreign car makers, given the size of the market and weak sales elsewhere in the world.

China's full-year auto sales hit 21.98 million vehicles last year, when a recovery in Japanese brands offset the impact of slowing economic growth.

US auto maker General Motors said its sales increased by 12.7 per cent in July from the same period last year to 249,734 vehicles.

GM's China sales also rose 10.7 per cent to 1.98 million vehicles in the first seven months of the year, the company said.

It also said its annual sales in China, its biggest market, had reached two million vehicles for the year.

That marked "the fifth consecutive year and the earliest ever that GM has reached the milestone", it said.

"We will continue to expand our portfolio and introduce more product offerings in China to meet increasingly diverse demand in our largest market," GM China president Matt Tsien said.

US automaker Ford's China sales rose by 25 per cent to 90,775 vehicles in July from the same month last year, the company.

In the first seven months, sales rose 33 per cent from the same period last year. In July, Ford's China sales increased 33 per cent to 640,031 vehicles, it said.

Author

Quick Summary

Auto sales in the world's biggest car market accelerated in July, growing by 6.7 per cent to 1.62 million vehicles.

Associated image

Media

Categories

Primary category

Status

Published

Content Channel

China property developer Shui On Land gives warning

0
0

Shanghai-based property developer Shui On Land said it expects its first-half earnings to fall by around 25 per cent compared with the same period a year earlier, becoming the latest in a string of developers to issue profit warnings amid a nationwide housing downturn in China.

The property firm, which is listed in Hong Kong, said the expected decrease in profit was partly due to a 7 per cent fall in gross profit margins from property sales, foreign-exchange losses due to a weaker yuan, and increased expenses from establishing an asset-management platform.

"The group is modifying its business strategies to better cope with the changing policy and market environment in China," the firm said in a stock-exchange announcement, adding that it "remains cautiously optimistic regarding its long-term performance."

The property firm said it expects strong sales from a residential project called Shanghai Rui Hong Xin Cheng from the second half of 2015. It also anticipates healthy income from rents as investment projects are completed in the coming year.

The profit warning follows similar moves by its peers, which are facing reduced profit margins and growing difficulty in borrowing. Chinese property developers also face mounting pressure to cut prices as housing inventory builds up. Shanghai Zendai Property Ltd., Greentown China Holdings Ltd., China Overseas Grand Oceans Group Ltd. and Greenland Hong Kong Holdings Ltd. have issued profit warnings in recent weeks.

Shui On Land is led by tycoon Vincent Lo, best known for developing Xintiandi, a popular restaurant and entertainment project in downtown Shanghai. The company is due to report its earnings by the end of August.

Author

Quick Summary

Shanghai company the latest to suffer amid nationwide housing slump.

Associated image

Media

Categories

Primary category

Status

Published

Content Channel

Is China making a big mistake about Japan?

0
0

Lowy Interpreter

It has long been an axiom of Asian strategic analysis that the last thing Beijing wants is a rearmed, strategically independent, 'normal' Japan. And yet it seems obvious that Beijing's highly assertive policies are pushing Tokyo in exactly that direction. To many this provides yet another sign that China does not know what it is doing.

This is reassuring to those who think we do not need to take China's challenge to US regional leadership too seriously. As long as China foolishly stokes anxiety and provokes counter-balancing action among its neighbours, America has little to fear.

Well, maybe. But before we assume that China is being foolish, it is worth looking more closely at alternative explanations of what is going on. There is a chance that Beijing might be making a rather different mistake from the one most of us assume, and there is even a chance that they are not making a mistake at all.

One thing is for sure: China's conduct, especially over the Senkakus, is undermining Japan's post-war strategic posture, a posture which has served both Japan and China so well for so long. The foundation of that posture has of course been Japan's confidence that it can rely on America for its security, which in turn has seemed essential to Japan's unique version of 'national pacifism'.

As I have argued before (Explaining China's behaviour in the East and South China Seas), China's actions over the Senkakus seem deliberately designed to undermine Japan's confidence in American support by showing Japan that on a critical issue America is not willing to risk a clash with China on Japan's behalf. And that seems to be working. Despite President Obama's bold affirmation of US support over the disputed islands in Tokyo in April, Japanese confidence in US support against China does seem to have waned. The clearest signs are of course Mr Abe's steps to embrace collective self-defence and start looking for allies in Asia, including Australia.

These are exactly the kinds of steps towards normalisation that we could expect Beijing to want to avoid. So what is going on? There seem two possible alternatives to the conclusion that Beijing is just making a mistake.

The first and perhaps more probable explanation is that China's leaders believe Japan is incapable of becoming a 'normal' military power again, even if it does lose confidence in US support. Beijing quite possibly assumes that Abe's bid to rebuild Japan as a great power in Asia is doomed to fail. After twenty years of economic stagnation, political drift, demographic decline and natural disasters, Japan is simply too demoralised to remake itself into a serious independent military power again.

My ANU colleague Amy King has recently written an outstanding piece suggesting that this is exactly what Beijing thinks. She shows that Chinese statements and commentaries almost completely omit Japan from discussion of Asia's strategic future. They just don't seem to take Japan seriously as a potential great power. That seems right to me: I've always been struck by how readily Chinese interlocutors dismiss Japan as a possible strategic rival.

This would explain why Beijing doesn't seem to worry about how Japan responds to its assertive tactics in the East China Sea. China's leaders may hope and expect that if their pressure tactics work, Japan will lose confidence in America and yet be unable to reassert an independent role as a great power. In which case, Beijing might think, Japan would have no alternative but to acquiesce in Chinese regional leadership.

But are the Chinese wrong to dismiss Japan as a future strategic rival in this way? I've always tended to believe that they were. Japan has such an intense sense of its own identity, and such an intense fear (thanks in part to China's own conduct) of how it would fare under China's regional leadership.

But many people who know Japan much better than I do say that this may not be right. They argue that Japan might indeed be unable, or at least unwilling, to resist Chinese regional leadership if American leadership falters. Now Brad Glosserman of CSIS has written a fascinating essay in the Summer 2014 issue of Washington Quarterly that sheds a lot of light on Japan's choices at this critical moment. Although Brad does not draw this conclusion specifically, his analysis does lend support to the idea that Japan would accept a subordinate status in a Chinese-led Asia. If that is right, then the current moves to undermine the US-Japan alliance make good strategic sense for Beijing.

The second possibility is that Beijing has got Japan wrong, and instead of sliding gracefully into subordination Japan would respond to any erosion of US leadership by rallying to Abe's call and re-establish itself as a great power in Asia, with nuclear weapons and all. I still think this is a real possibility.

If Beijing sees this as a possibility, or if it comes to see it as such in future, then it will face an interesting choice: would it rather face Japan as a strategic rival in Asia, or America? Either it stops trying to undermine the US-Japan alliance, which leaves US strategic weight in Asia largely intact as the principle limit to Chinese ambitions. Or it undermines the US-Japan alliance, in which case Japan replaces America as the major balancer of Chinese power in Asia. Which would Beijing rather deal with? I think they'd probably prefer Japan.

So either way, China's strategy may not be so dumb after all.

Originally published by The Lowy Institute publication The Interpreter. Republished with permission.

Categories:

Status

Published
Beijing's decision to provoke Japan and scare its neighbours may be smarter than it looks.

Media

Type

Tencent earnings surge on back of smartphone gaming

0
0

Chinese Internet giant Tencent Holdings posted a 59 per cent jump is second-quarter net profit as smartphone gaming revenues continue to surge.

Tencent, which is China’s biggest listed technology firm, reported a rise in net income to 5.84 billion yuan (US$ 949 million) beating analysts expectations.

Online games revenue increased by 7 per cent to 11.08 billion yuan. The number of monthly active users on its messaging app WeChat increased 57 per cent year-on-year to 438 million at the end of the second quarter of 2014.

Ma Huateng, Chairman and CEO of Tencent, said online advertising grew particularly strongly due to increased traffic to the company’s video platform , the FIFA World Cup event and performance advertising on the company’s mobile social platform.

Author

Quick Summary

Tencent posted a 59 per cent jump in net profit thanks to WeChat.

Associated image

Media

Categories

Primary category

Status

Published

Content Channel

Are we gambling too heavily on a Chinese tourism boom?

0
0

You’ve probably seen the signs: an increasing number of tour buses on the streets, notices in Mandarin strewn throughout our airports and the whispers of the foreign language in hotel lobbies across the country.

Australia is gearing up to capitalise on its next boom industry, Chinese tourism. And it’s set to be a huge windfall for the country.

As part of its Tourism 2020 plan released mid-2013, Tourism Australia estimated that the Chinese tourism market could be worth up to $9 billion by 2020. By May this year that had been upwardly revised to $13bn.

They have good cause to be enthusiastic: HSBC estimates that by 2020 up to 20 per cent of short-term arrivals in Australia every month will be from China, and Chinese tourists will on average spend almost double the amount per night than other visitors.

China is a huge talking point for Australia’s tourism industry, but one aspect that’s not being discussed is the idea of overexposure. Is our tourism sector transforming into an industry that is too reliant on Chinese tourism?

Australia has made this mistake in the past: back in the 1980s, Australia positioned itself to capitalise on a strong influx of high-spending Japanese tourists. When the Japanese housing bubble burst and the yen collapsed, our prior lack of attention to other markets cost us dearly.

The good news is that since this collapse Australia has worked to build quite a diverse tourism intake. But with the focus increasingly on China, we're at risk now of repeating our past mistake.

Perhaps the most underestimated tourist market is New Zealand. The number of Kiwi’s hitting our shores has exploded over the past couple of years. 

Despite this, New Zealand is only expected to be worth at most $4.2bn to Australia in tourism dollars by 2020 -- less than a third of China’s forecast spend.

Tourism Australia’s market research on New Zealand visitors hints at why this may be the case. Kiwis typically spend less time and less money in Australia than tourists from other major destinations. 

Still, Australian tourism expert and associate dean of the School of Hotel and Tourism Management at the Hong Kong Polytechnic University, Brian King, warns that New Zealand’s economic impact may be undervalued, largely due to a general underestimation of the amount tourist visiting friends and family spend during their trip.

We may be underestimating other markets as well.

According to LaTrobe university tourism and education researcher Sue Beeton, India was the "flavour of the month" in Australian tourism circles a couple of years ago. Now, it’s estimated it will be worth up to $2.3bn to Australia’s tourism sector by 2020 -- less than New Zealand.

King also contends that the number of Japanese tourists coming to Australia will rise. Estimatess suggest Japanese tourism will be worth $3.3bn by 2020.

Despite the huge potential of these markets, it’s unlikely they will get much of a mention in our ongoing tourism debate. Like most of the discourse about China, we seem fixated on this one country and its potential benefits. Are we so focused on China’s future that we risk missing out on other opportunities?

Got a question? Let us know in the comments below or contact the reporter @HarrisonPolites on Twitter.

Categories:

Status

Published
Australia's tourism industry is busy wooing wealthy Chinese tourists, but other potentially lucrative markets are being ignored.

Media

Type


Chinese bank inks Brisbane lease

0
0

The world's sixth-largest bank by market capitalisation -- China Construction Bank -- has leased an entire boutique building in the Brisbane CBD, The Australian Financial Review reports.

According to the newspaper, CCB has looked at acquiring the property previously, but has instead signed a seven-year lease for the Queen Street site. 

The bank has taken the lease ahead of November's G20 summit, but did not make a statement on the deal.

The AFR reports the property has recently been sold to local syndicator Trident Corporation for in excess of $5 million, however, CCB will pay more than $800 a square metre to rent it. 

Author

Quick Summary

China Construction Bank signs seven-year lease for Queen St site ahead of G20 summit: report.

Associated image

Media

Categories

Primary category

Status

Published

Content Channel

BMW China dealers fined for price fixing

0
0

Four Chinese dealers of German automaker BMW have been fined about 1.6 million yuan ($A280,000), authorities have said, as the government steps up a high-profile anti-monopoly campaign involving a number of foreign brands.

The dealers in Wuhan in the central province of Hubei have been ordered to pay the penalties for "forming a price alliance", provincial authorities said this week.

The dealers had agreed to consistently charge a fee for the pre-delivery inspection of cars, which falls under "the obligations and responsibilities" of the auto maker and its dealers, the statement said.

"This is price swindling behaviour and must be resolutely stopped immediately," the authorities said.

The dealers were each fined between 150,000 yuan and nearly 940,000 yuan.

China has in recent months launched high-profile probes into alleged violations by a host of foreign firms in a range of different sectors including pharmaceuticals, technology and baby milk, raising fears that overseas companies are being targeted.

China's Ministry of Commerce last week released a statement emphasising that the country's six-year-old anti-monopoly law did not discriminate between foreign and domestic companies.

The European Union Chamber of Commerce in China expressed concern that European businesses were "increasingly considering the question of whether foreign companies are being disproportionately targeted".

Auto firms are the latest to be investigated, and last week the government pledged to sanction Audi, owned by Volkswagen, and Chrysler of the US, now part of Italy's Fiat group, without stating what penalties they would receive.

On Monday, Audi announced it will accept punishment for breaching Chinese anti-monopoly laws.

The Hubei authorities also said in the statement they were working on the penalties to be meted to manufacturers and dealers of other auto brands including Audi.

Several car companies have announced price cuts in response to the inquiries.

Beijing considers using a dominant market position to set prices as a form of monopoly. Violators' "illegal gains" can be confiscated, and they can be fined up to 10 per cent of their sales revenues from the previous year.

Author

Quick Summary

Car dealers in Wuhan ordered to pay penalty for "forming a price alliance".

Associated image

Media

Categories

Primary category

Status

Published

Content Channel

OmniVision gets Chinese offer

0
0

OmniVision Technologies, a maker of digital imaging chips for smartphones and other devices, says it has received a buyout offer from a group of Chinese investors for some $US1.6 billion ($A1.7 billion).

The California group said in a statement it "received a preliminary non-binding proposal" from Hua Capital Management Ltd to acquire the company for $US29 a share.

OmniVision's board of directors "is reviewing and evaluating HCM's proposal" and has made no decision on it, it said.

The investment group includes Shanghai Pudong Science and Technology Investment Co Ltd, a state-owned limited liability company under the Pudong New Area government of Shanghai, according to the statement.

OmniVision, founded in 1995, has some 2,000 employees and annual revenues of $US1.45 billion.

Its products are used in smartphones including Apple's iPhone and in webcams, security cameras and medical imaging equipment.

Author

Quick Summary

Digital imaging chip-maker says it has received a buyout offer from a group of Chinese investors for some $A1.7 billion.

Associated image

Media

Categories

Primary category

Status

Published

Content Channel

China cops open fire on protesters: report

0
0

Police in a restive area of southwestern China's Sichuan province have opened fire on Tibetans protesting the detention of a village leader, wounding about a dozen people and arresting others, reports say.

The police fired tear gas and live ammunition to disperse hundreds of Tibetans who gathered in Loshu township in Ganzi, or Kardze, prefecture on Tuesday following the detention of village leader Dema Wangdak, US-based Radio Free Asia quoted exiled Tibetans as saying.

"Hundreds gathered to call for Wangdak's release because he is innocent, but the Chinese authorities sent in security forces to crack down on the protesters," Demay Gyaltsen, an Indian-based Tibetan exile with contacts in Ganzi, told the broadcaster's Tibetan service.

Wangdak's son and brother were among at least 10 Tibetans who were seriously injured in the clash, Gyaltsen said.

The broadcaster and Tibetan exile websites published photographs of the protest, adding that Chinese authorities suspended communication services after the shooting.

"The village is now entirely surrounded by security forces and many of the adults in the village have gone to the hills to hide," Jampa Youten, a Tibetan Buddhist monk based in southern India, told Radio Free Asia.

Wangdak was reportedly detained after a disagreement over local cultural activities, which require approval by China's ruling Communist Party.

The protest was not reported by Chinese state media.

Many Tibetan areas of China have remained under strict police control since widespread anti-government protests in 2008.

Police have further tightened security in the last four years amid a series of at least 130 self-immolation protests by monks, nuns and lay Tibetans.

Author

Quick Summary

About a dozen people wounded after police open fire on protesting Tibetans in Sichuan Province.

Associated image

Media

Categories

Primary category

Status

Published

Content Channel

Economic war and the humbling of multinationals in China

0
0

Lowy Interpreter

'I really worry about China. I am not sure that in the end they want any of us to win', confided GE boss Jeff Immelt to a group of fellow multinational business-people dining in Shanghai in 2010.

So far, GE has mostly stayed out of trouble in China. But many other Fortune 500 companies have been whacked by the Chinese authorities: for corruption (GSK), food safety problems (KFC and MacDonalds), security concerns (Cisco, IBM and others), quality problems (Samsung), forced upgrades (Microsoft), monopolistic behaviour (Qualcomm), and 'unparalleled arrogance' (Apple).

Offshore deals have been postponed or even forbidden by Beijing. And recently, foreign carmakers have been hit for excessive pricing on the mainland (more on this later), an accusation which has also been directed at Starbucks, milk suppliers, luxury goods companies and drugs firms. The list is practically endless.

Beijing uses three agencies to prosecute foreign firms, depending on their sin: the National Development and Reform Commission (NDRC) reviews pricing, the Commerce Ministry approves mergers and acquisitions, and the State Administration for Industry and Commerce (SAIC) probes anti-trust matters. It is a formidable trio, and the Chinese state rarely loses cases on its home turf. Multinationals can also find themselves simultaneously brutalised in the Chinese press; almost all succumb meekly to the charges, correct their mistakes and apologise for hurting the feelings of the people.

To be fair, the Chinese authorities usually do have good grounds for complaint. Foreign companies often behave badly in China. But it seems that successful foreign companies are targeted, as if Beijing deliberately wants them humbled. Immelt appears surprised by this possibility. He shouldn't be.

China is, first and foremost, a state capitalist. Like all nations, it covets the mercantilist objective of commercial success. Countries don't fight economic war like they fight militarily, but sometimes it feels that way. The AFR's Angus Grigg, in anintriguing short piece on the deteriorating business climate for multinationals earlier this week, reported a Chinese official acknowledging this point forthrightly: 'It's an economic war'.

Twenty years ago, John Fialka's superb War by Other Means described in scary detail how nations conduct underground conflict in the commercial realm; Japan then was America's most feared rival, although China was charging up the list. The Japanese, led by the masterly bureaucrats at the Ministry of International Trade and Industry, had achieved global success based on a level of chauvinism in their home market that China has never approached. The Japanese were much too polite to say what the Shanghai official told Grigg, but no doubt embraced 'economic war.'

Unfortunately, this term literally applies to the worsening situation with Russia, which faces sanctions and other forms of 'lawfare'. Both China and Russia are perceived to be at the vanguard of growing anti-Western statism, but China is a more formidable and subtle player than the Soviet Union ever was. 'The Chinese were never as stupid as the Russians, who came to us and said repeatedly "we will bury you"', as Zbigniew Brzezinski splendidly put it last week.

Indeed, China's strategy in the state capitalism game seems beyond such easy explanation. Back to the car market. Chinese consumers have long complained about paying 2-3 times what Americans pay for luxury cars. Most of this gap is explainedby formal levies, such as import duties and sales taxes. But not all. The authorities worked backwards through the pricing layers and found three anomalies. First, carmakers have been stiffing local dealers. Second, carmakers overcharge for spare parts. Third and most damning, Beijing has found that premium cars rolling out of German factories are marked up outrageously when heading for China, which may account for one-third of German carmaker profits. Chinese consumers are being gouged and Beijing is angered by this unfairness. Beijing probably also resents the fact that the brands are 'skimming' this money back home rather than sharing the profits with their China joint ventures.

Yet forcing foreigners' prices lower is the very opposite of what other mercantilists do. Japan and Korea are delighted to see foreign cars at huge premiums compared to indigenous alternatives; all the better to encourage buy-local preferences. Nations criticise each other at the WTO for 'dumping' — exporting below cost or home-market prices — yet China's objection is the reverse. Forcing foreign carmakers to lower their prices doesn't help China's national champions either; it hurts them by lowering prices relative to domestic brands. Are Beijing's actions about consumer advocacy, or does it simply want to take away the super-profits of foreign companies who might otherwise further dominate China's booming car market?

The claim of 'monopolistic' behaviour is iffy. Competition in cars is fierce and consumers can choose between many brands. Chinese car buyers act more affluently than Western ones, so it is hard to argue for greater affordability. Western companies in China are doing what all businesses do: charging whatever price the market bears. If Beijing is so concerned about monopolies, it could do much more by investigating its own state-owned enterprises. And perhaps Beijing should consider why domestic agricultural prices are soaring above international levels, a direct result of subsidising farmers at the expense of urban households. In other words, there are plenty of domestic pricing anomalies to investigate.

International business people are often told here that 'they are not invited to China to profiteer; they are invited to make the Chinese better'. The guests are held to higher standards than locals, and they should be. Chinese officialdom is making a mighty effort to build future Chinese global champions like Immelt's GE. Knocking foreigners is part of their strategy, forcing them to be more responsive and competitive. Multinational companies are 'making China better', but China is making them better too.

Originally published by The Lowy Institute publication The Interpreter. Republished with permission.

Categories:

Status

Published
Claims that Western companies are acting like monopolies in China are bunk. They are simply doing what all businesses do: charging whatever price the market bears.

Media

Type

Researcher sacked over Qualcomm payment

0
0

A senior Chinese anti-trust expert has been sacked from a high-level government advisory panel for allegedly accepting a 6 million yuan consultation fee from American mobile chipmaker Qualcomm.

Professor Zhang Xinzhu is the director of Research Centre for regulation and Competition at the Chinese Academy of Social Sciences and one of the country’s leading experts on competition law. He is the first expert to be sacked from the State Council’s Anti-Monopoly Expert Advisory Panel.

Chinese state-owned media alleged that Qualcomm, which is under anti-trust probe in China, engaged Professor Zhang to produce an expert report that would dispute the investigation’s claims for a fee of six million yuan. Professor Zhang has disputed the allegation that he had accepted six million from the American chip-maker in an interview with Caixin.

Qualcomm has been under investigation by Chinese regulators and could face up to US$1 billion fine if found guilty.

The National Development and Reform Commission also reportedly told Professor Zhang’s academic employers, including the Chinese Academy of Social Sciences, to fire him from his current research positions. Professor Zhang was involved in the drafting of China’s first anti-monopoly law.

Author

Quick Summary

China sacks anti-monopoly adviser for allegedly accepting a 6 million yuan consultation fee from American chip-maker.

Associated image

Media

Categories

Primary category

Status

Published

Content Channel

Lenovo takes on Apple, Samsung in smartphones

0
0

Lenovo Group  is on a fast track to become a major player in smartphones -- not just in China but also overseas, taking on Samsung Electronics  and Apple.

Already the world's largest PC maker by shipments, the Chinese company has made big progress in smartphones. In the second quarter, Lenovo not only became the No. 1 smartphone maker in China, overtaking Samsung, but it was the No. 4 vendor by shipments world-wide, according to research firm IDC. Analysts predict Lenovo could become an even bigger player after it completes its acquisition of Google's Motorola Mobility handset unit, which it agreed to buy for US$2.91 billion earlier this year.

"Although China is still the most important market for our smartphone business, we think we have even more opportunities outside China," Chief Executive Yang Yuanqing said Thursday in an interview with The Wall Street Journal.

Thanks to strong smartphone sales in Southeast Asia, Eastern Europe and Latin America, Lenovo said Thursday that its net profit for the quarter ended June 30 rose 23 per cent to US$214 million from US$174 million, beating analysts' expectations. Revenue rose 18 per cent to US$10.4 billion from US$8.79 billion a year earlier.

Lenovo said its smartphone shipments in the quarter jumped nearly fourfold in Southeast Asia and sixfold in Eastern Europe, without disclosing figures.

"Those are our future potential markets, so we definitely put more effort and more resources into those markets," Mr. Yang said.

But Lenovo's success in the global market also hinges on how much it can benefit from Motorola. Mr. Yang said Motorola's strength in North America and Latin America, as well as its intellectual property and close ties with mobile carriers world-wide, will help Lenovo become a more-competitive player abroad. In the U.S., Lenovo plans to concentrate on Motorola-branded smartphones, rather than launching phones with the Lenovo logo.

Motorola lost money under Google, but it is recovering faster than expected, and Lenovo continues to predict it can make the business profitable in four to six quarters after it closes the deal, Mr. Yang said.

Chinese players such as Lenovo and Huawei Technologies  are stepping up their overseas expansion, posing a threat to Samsung as they sell affordable Android handsets with competitive technological features to millions of consumers who are still replacing their basic cellphones with smartphones. As the market for high-end smartphones becomes saturated, the industry's growth is being fueled by demand for inexpensive models in emerging markets such as Southeast Asia, India, Brazil and Russia.

Lenovo, for example, now holds an 8 per cent share in Malaysia and 7 per cent in Vietnam compared with having little presence in those two markets a year ago, according to data from Counterpoint Research.

"They seem to have found a sweet spot," said Counterpoint analyst Tom Kang. Like most Chinese handset makers, Lenovo sells smartphones that are much cheaper than the iPhone or Samsung's flagship Galaxy phones. Among Chinese companies, Lenovo is the most familiar brand in Southeast Asia thanks to its PC business, Mr. Kang said.

While many smartphone makers outsource their production, Lenovo manufactures its own handsets at its huge industrial complex in the central Chinese city of Wuhan. In-house manufacturing has enabled it to have the flexibility in making changes to its product line-up.

Still, Lenovo's success in the global market isn't guaranteed. Challenges from other Chinese rivals that offer even-cheaper phones could put more pressure on its profit margins not just in China but overseas, Sanford C. Bernstein analyst Alberto Moel said.

Mr. Yang said Lenovo's smartphone business in China is profitable but makes only "a little bit of money." Profitability from smartphones in emerging markets is higher than in China, he said.

Lenovo isn't the only Chinese player with global ambitions. Huawei, the world's third-largest smartphone maker ahead of Lenovo, said last month that its smartphone shipments in the Middle East and Africa in the first half of 2014 jumped more than sixfold from a year earlier, while Latin America shipments rose nearly fourfold. Upstart Xiaomi, meanwhile, is also trying to sell more smartphones abroad.

PCs still account for nearly 80 per cent of Lenovo's revenue, but the mobile-devices business, which represents 15 per cent, is growing fast. In the second quarter, Lenovo's market share was 5.4 per cent, trailing Samsung with 25.2 per cent, Apple with 11.9 per cent and Huawei with 6.9 per cent, according to IDC data. In China, it became the biggest smartphone vendor by grabbing a 12.5 per cent share, while rival Samsung, with 9.8 per cent of the market, struggled with high inventories of unsold phones. 

Author

Quick Summary

Chinese firm's net climbs 23 per cent amid strength in Southeast Asia, Eastern Europe and Latin America.

Associated image

Media

Categories

Primary category

Status

Published

Content Channel


China cracks down on money leaking out of its borders

0
0

China is trying to regain control of the cash flowing across its leaky borders and the effects will be felt around the world.

Beijing technically bans its citizens from buying overseas properties and stocks, and limits the money they can transfer abroad to US$50,000 a year. Despite these rules, wealthy Chinese have found ways to move their money across the border, making them the biggest international buyers of properties in places like the U.S. and fueling a boom in Macau's casinos.

Underground channels--such as the money-exchange shops found across Hong Kong -- have flourished in recent years. Some Chinese banks have quietly provided services to funnel customers' money across the border to boost their businesses.

"There seems to be a desire to tighten," said Oliver Barron, head of investment bank North Square Blue Oak's Beijing office. "The government is reacting to perceived outflows as Chinese businessmen want to get their money out."

The government has a lot of leaks to plug. These include longstanding strategies such as businesses over-invoicing their purchases or individuals using informal money-transfer networks. Other methods are more controversial, such as a Bank of China program that allowed clients to move large sums abroad. In the gambling center of Macau, the rich have used junkets, which lend them money in the former Portuguese territory and collect the debts back home. Less wealthy gamblers use their UnionPay cards, China's only domestic bank card, to make fake purchases, pocketing the cash.

China's gambling capital is among the first to feel the chill. Macau's casino revenue fell for a second straight month in July, dropping 3.6 per cent from a year earlier.

Grant Bowie, chief executive officer of MGM China Holdings -- MGM Resorts International's China venture -- said at a news conference this week that China's moves to strengthen capital controls represent "a significant policy shift" that has made Chinese visitors to Macau "more circumspect."

Both of the main channels for getting cash out in Macau are being squeezed. UnionPay said in March that its payment network has tightened checks on suspicious transactions in the territory to combat money laundering.

Junkets are facing pressure from casinos and regulators to disclose the names of their customers.

Other methods of moving money are also disappearing. Jewelry counters on casino floors, where gamblers could do a quick buy-and-return transaction and come away with cash, have recently been shut.

"These outlets were put on these prime real-estate locations for one reason--to drive the mass business," said Ben Lee, managing partner of IGamiX Management and Consulting, who advises casinos. "Moving them away should thus have an inverse relationship to the growth of business there."

The biggest global impact of the crackdown will be felt in real estate. Chinese buyers have buoyed property markets from Sydney to Vancouver to London. Given the high prices of the homes involved, the buyers are certainly moving more than US$50,000 out of the country.

One route favored by real-estate investors that has been shut down is a money-transfer service run by Bank of China Ltd. called You Hui Tong. Bank of China has said that it has received some regulatory approval for the service. China is also working on a deal with U.S. regulators that would force U.S. banks to disclose the assets of Chinese depositors.

The squeeze is already hitting Chinese developers working overseas, such as Country Garden Holdings Co. The developer has marketed some of the 10,000 units in a new waterfront land development in Danga Bay, Malaysia, to mainland buyers.

Country Garden's Malaysia project, its first international foray, was lauded as a success in its 2013 annual report, with contract sales of 7 billion yuan (US$1.13 billion). But this year, it has suffered from cancellations, mainly from Chinese buyers, according to people close to the matter. Some have cited difficulty in obtaining mortgages or moving funds offshore as one of the reasons for canceling.

The company said in an emailed response that You Hui Tong isn't the only overseas remittance method its Chinese buyers use. Although the impact of the closing of the service is limited, it does affect its marketing campaign, the company said.

The developer is now trying to attract buyers through discounts. It is also offering customers advice on how to get the cash needed to buy a unit out of China. During a recent visit to its sales office, about a 10-minute drive from Singapore, a saleswoman said that with the Bank of China channel closed for now, clients should look into underground money-exchange channels.

Some Chinese are using friends' and family members' transfer quotas to get the money they need over the border. But that practice has raised red flags too, with global banks increasingly scrutinizing money laundering.

For those who seek government approvals for big property purchases abroad, various regulatory bodies in China are asking detailed questions about where the money comes from and what they are buying with it, said Darren Xia, China director at real-estate firm Jones Lang LaSalle. "The government isn't turning the tap off," Mr. Xia said. "But they don't want it to get out of control."

Author

Quick Summary

Heightened oversight on cash makes it harder to buy property overseas, gamble in Macau.

Associated image

Media

Categories

Primary category

Status

Published

Content Channel

China protests highlight shadow lending problems

0
0

A wave of small protests outside banks and government offices around China in recent days has cast a spotlight on shadow lending, a sector that provides important alternative financing channels for small firms shut out of regular bank loans.

On Tuesday, a group of investors in the city of Chengdu in Sichuan province held a demonstration in front of local government buildings after one of the biggest credit-guarantee companies in Sichuan failed to step in and cover loans to small firms it had insured.

A day earlier, a few dozen investors staged protests outside Industrial & Commercial Bank of China branches in Guangzhou and Shanghai after they had been told they would need to wait at least another 15 months to get the payout on a trust-company product sold at the bank that they wanted the lender to step in to ensure payment.

Protesters carried a banner reading, "Swindler ICBC, pay back our blood-and-sweat money," outside an ICBC branch in Guangzhou. The product's prospectus didn't mention any liability for ICBC in case of default, but several investors said the bank had assured them of the product's low risks.

Neither ICBC nor the trust company responded to requests for comment.

Regulators have long sought to curb the proliferation of shadow lending on concerns of a buildup of debt. A widely anticipated wave of defaults among China's trust companies--which act as conduits by raising money to invest in assets or to make loans--has so far failed to materialize. But the protests, which follow other similar events around China in recent months, serve as a reminder of the difficulty to pin down who is responsible when something goes wrong.

The Sichuan protests illustrate the problematic role of lightly regulated credit-guarantee companies, which have become an important component on the path to loans for China's small and medium-size firms. Bank and other financial institutions typically require significant collateral, which small firms rarely have, to back a loan. But they are sometimes willing to extend credit if another company promises to pay off the loan if the borrower can't. The credit-guarantee companies give banks and other lenders peace of mind that their loans are safe, charging the borrower a small fee for the service.

An investor surnamed Gao in Chengdu said he invested 500,000 yuan ($80,600) in a small loan company late last year, with the funds then being lent out to small businesses in the province. Mr. Gao said he was promised at least 15% annualized return on his investment.

The lending was guaranteed by Huitong Credit & Guaranty Co., which said in a statement on July 15 that its chairman and other executives hadn't been seen for more than a week. Phones rang unanswered at both the company and local government offices on Thursday.

"I learned from local press that the executives [of Huitong] have run away and then I knew my investment was in danger," said Mr. Gao.

Besides small loan companies, Huitong also guaranteed loans to small firms made by trust companies and banks. It isn't clear whether those investments are also at risk.

The unclear role of banks in the sale of trust-company instruments is at the heart of the ICBC protests. The product that sparked the protests was issued by China Credit Trust Co. and attracted a total of 1.3 billion yuan ($210 million) from investors. It had required a minimum investment of at least three million yuan and promised around 10% annualized return.

The company said it would pay back investors over the coming 15 months, after selling its collateral, including several coal mines.

"ICBC managers told us the product was safe and both the principal and interests are guaranteed," said Zhang Liang, an investor in Guangzhou who attended Monday's protest. "If it wasn't sold by ICBC, we would not have bought the product since we never heard of this trust firm before," he said.

Author

Quick Summary

Protests held in Chengdu and outside ICBC banks in Shanghai and Guangzhou.

Associated image

Media

Categories

Primary category

Status

Published

Content Channel

China's power consumption slows in July

0
0

Chinese electricity consumption has slowed to a three per cent increase in July, marking the lowest growth rate in 16 months and a further sign of significant downward pressure on the world’s second largest economy.

Electricity consumption is an important gauge of economic activity in China and had been growing at 4.9 per cent for the first seven months of 2014.

Chinese industry accounts for 70 per cent of overall electricity consumption in the country and high energy intense sectors are responsible for 50 per cent of the total industrial electricity consumption.

Industrial consumption only increased 2.9 per cent in July compared with 5.1 per cent in June.

A slew of surprisingly bad data has sparked speculation that Beijing could unleash a stronger easing policy in the second half of the year to support growth.

Author

Quick Summary

Chinese electricity consumption has slowed sharply in July, marking the lowest growth rate in 16 months.

Associated image

Media

Categories

Primary category

Status

Published

Content Channel

Editor's Picks

0
0

The bankers will now feast on Treasury Wine Estates
Alan Kohler
The settlement of a long drawn-out collusion lawsuit, combined with the prospect of a bidding war for TWE, confirms that big private equity is back. Investment banks will be licking their lips.

A tapering growth trajectory will test CBA
Stephen Bartholomeusz
Flatlining growth in Commonwealth Bank's second half suggests economic uncertainty and weak consumer and business confidence are likely to weigh on the bank's future profitability.


Should Hockey’s wealth be an issue?
Rob Burgess
Labor's many career politicians hardly represent the struggles of ordinary Australians, either.

Take Australia’s unemployment rate ‘shocker’ with a grain of salt
Adam Carr
Australian society is changing and so are our work habits. Until the participation rate stabilises there's no point fretting over a small lift in the unemployment rate.

The calm before the eurozone storm
Oliver Marc Hartwich
The ECB's implicit guarantee of a bailout may have calmed the euro crisis temporarily, but it has also caused governments to become complacent with their reform agenda.

Sluggish wage growth will hit household budgets hard
Callam Pickering
A persistent decline in wages and rise in spare capacity suggest Australia's next recession will have fewer job losses than in the early '90s, but wage growth will be much weaker.

Avoiding a new era of retail electricity rip-offs
Tristan Edis
People already encounter traps in signing up to electricity contracts, so opening the market to more complex retail offerings, incorporating products like solar, batteries and smart appliances could be overwhelming. Mobile phones offer some lessons.

Get ready for a softer property market
Callam Pickering
A rising unemployment rate, subdued wage growth, and already high levels of indebtedness mean the property market is becoming less appealing for investors and home buyers alike.

How Masters became a DIY disaster for Woolworths
Stephen Bartholomeusz
Cost blowouts at its Masters business have forced Woolworths to concede that its strategy for the hardware sector was highly flawed. Ongoing losses will only further undermine its credibility.

Most read


Gold and oil are quiet … too quiet
Alan Kohler
Gold and oil prices have remained dormant despite ongoing conflict in the Middle East and growing tensions between Russia and the West. It looks like neither commodity is a reliable way to trade global tensions anymore.

Most commented

Without real reform, Hockey’s budget pain will be for nothing
Callam Pickering
Peter Costello is right to discredit the government's proposed GP co-payment. Far more rigorous reform in healthcare, aged care and tax is necessary to avoid long-term fiscal catastrophe.

Categories:

Status

Published
In this week's essential reading guide, Kohler keeps an eye on Treasury Wine, Bartholomeusz looks at CBA's earnings report and Burgess tackles the hypocrisy surrounding politicians' wealth.

Media

Type

Mass pro-government rally in Hong Kong

0
0

Tens of thousands of people, some waving Chinese flags, have marched through Hong Kong protesting a pro-democracy campaign to blockade the business district unless Beijing grants acceptable electoral reforms.

Sunday's rally in searing summer heat came around seven weeks after rival pro-democracy protesters staged a mass march demanding a greater say in choosing Hong Kong's next leader.

Public discontent in the semi-autonomous Chinese city is at its highest for years, with concern at perceived interference by Beijing and growing divisions over how the next chief executive should be chosen in 2017 under planned political reforms.

Pro-democracy campaigners from the Occupy Central group have pledged to mobilise thousands of protesters to block roads in the Central financial district later this year if authorities reject the public's right to nominate candidates for the post.

But the movement has been strongly criticised by Beijing and city officials as illegal, radical and potentially violent.

Organisers of Sunday's rally, the Alliance for Peace and Democracy, said the silent majority in the city of seven million did not support Occupy.

"We want to let the world know that we want peace, we want democracy, but please do not threaten us - do not try to turn this place into a place of violence," alliance co-founder Robert Chow said.

Paul Yip, a statistician at Hong Kong University, said an estimated 57,000 attended Sunday's rally.

Police said 111,800 people left the starting point in Victoria Park while the organisers put the figure even higher at 193,000.

Last month's pro-democracy march, in comparison, drew between 122,000 and 172,000 people according to independent estimates, while organisers claimed more than half a million had poured onto the streets.

Many of the protesters who filled the park on Sunday wore red to show their allegiance to Beijing.

Some carried a banner reading "Long live the Chinese Communist Party", while others chanted "No violence".

Author

Quick Summary

Tens of thousands of people protest a pro-democracy campaign to blockade Hong Kong's business district.

Associated image

Media

Categories

Primary category

Status

Published

Content Channel

Viewing all 2267 articles
Browse latest View live




Latest Images