Showing posts with label Chinese Economy. Show all posts
Showing posts with label Chinese Economy. Show all posts

Friday, January 28, 2011

China Buying up the world - View all


China buys up the world

And the world should stay open for business


N THEORY, the ownership of a business in a capitalist economy is irrelevant. In practice, it is often controversial. From Japanese firms’ wave of purchases in America in the 1980s and Vodafone’s takeover of Germany’s Mannesmann in 2000 to the more recent antics of private-equity firms, acquisitions have often prompted bouts of national angst.

Such concerns are likely to intensify over the next few years, for China’s state-owned firms are on a shopping spree. Chinese buyers—mostly opaque, often run by the Communist Party and sometimes driven by politics as well as profit—have accounted for a tenth of cross-border deals by value this year, bidding for everything from American gas and Brazilian electricity grids to a Swedish car company, Volvo.

There is, understandably, rising opposition to this trend. The notion that capitalists should allow communists to buy their companies is, some argue, taking economic liberalism to an absurd extreme. But that is just what they should do, for the spread of Chinese capital should bring benefits to its recipients, and the world as a whole.

Why China is different

Not so long ago, government-controlled companies were regarded as half-formed creatures destined for full privatisation. But a combination of factors—huge savings in the emerging world, oil wealth and a loss of confidence in the free-market model—has led to a resurgence of state capitalism. About a fifth of global stockmarket value now sits in such firms, more than twice the level ten years ago.

The rich world has tolerated the rise of mercantilist economies before: think of South Korea’s state-led development or Singapore’s state-controlled firms, which are active acquirers abroad. Yet China is different. It is already the world’s second-biggest economy, and in time is likely to overtake America. Its firms are giants that until now have been inward-looking but are starting to use their vast resources abroad.

Chinese firms own just 6% of global investment in international business. Historically, top dogs have had a far bigger share than that. Both Britain and America peaked with a share of about 50%, in 1914 and 1967 respectively. China’s natural rise could be turbocharged by its vast pool of savings. Today this is largely invested in rich countries’ government bonds; tomorrow it could be used to buy companies and protect China against rich countries’ devaluations and possible defaults.

Chinese firms are going global for the usual reasons: to acquire raw materials, get technical know-how and gain access to foreign markets. But they are under the guidance of a state that many countries consider a strategic competitor, not an ally. As our briefing explains (see article), it often appoints executives, directs deals and finances them through state banks. Once bought, natural-resource firms can become captive suppliers of the Middle Kingdom. Some believe China Inc can be more sinister than that: for example, America thinks that Chinese telecoms-equipment firms pose a threat to its national security.

Private companies have played a big part in delivering the benefits of globalisation. They span the planet, allocating resources as they see fit and competing to win customers. The idea that an opaque government might come to dominate global capitalism is unappealing. Resources would be allocated by officials, not the market. Politics, not profit, might drive decisions. Such concerns are being voiced with increasing fervour. Australia and Canada, once open markets for takeovers, are creating hurdles for China’s state-backed firms, particularly in natural resources, and it is easy to see other countries becoming less welcoming too.

That would be a mistake. China is miles away from posing this kind of threat: most of its firms are only just finding their feet abroad. Even in natural resources, where it has been most active in dealmaking, it is not close to controlling enough supply to rig the market for most commodities.

Nor is China’s system as monolithic as foreigners often assume. State companies compete at home and their decision-making is consensual rather than dictatorial. When abroad they may have mixed motives, and some sectors—defence and strategic infrastructure, for instance—are too sensitive to allow them in. But such areas are relatively few.

What if Chinese state-owned companies run their acquisitions for politics, not profit? So long as other firms could satisfy consumers’ needs, it would not matter. Chinese companies could safely be allowed to own energy firms, for instance, in a competitive market where customers could turn to other suppliers. And if Chinese firms throw subsidised capital around the world, that’s fine. America and Europe could use the money. The danger that cheap Chinese capital might undermine rivals can be better dealt with by beefing up competition law than by keeping investment out.

Not all Chinese companies are state-directed. Some are largely independent and mainly interested in profits. Often these firms are making the running abroad. Take Volvo’s new owner, Geely. Volvo should now be able to sell more cars in China; without the deal its future was bleak.


Show a little confidence

Chinese firms can bring new energy and capital to flagging companies around the world; but influence will not just flow one way. To succeed abroad, Chinese companies will have to adapt. That means hiring local managers, investing in local research and placating local concerns—for example by listing subsidiaries locally. Indian and Brazilian firms have an advantage abroad thanks to their private-sector DNA and more open cultures. That has not been lost on Chinese managers.

China’s advance may bring benefits beyond the narrowly commercial. As it invests in the global economy, so its interests will become increasingly aligned with the rest of the world’s; and as that happens its enthusiasm for international co-operation may grow. To reject China’s advances would thus be a disservice to future generations, as well as a deeply pessimistic statement about capitalism’s confidence in itself.


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Wednesday, January 26, 2011

China's Top 50 Logistics Enterprises, 2010-2011 - Research Report

The logistics industry involves manufacturers and logistics enterprises, including a series of links such as storage, transportation, package, distribution and information processing. By the end of 2010, there have been about 100,000 related enterprises of the logistics industry with low industrial concentration.

After the entry into WTO, China comprehensively carried out the policy of opening-up. In 2008, the Ministry of Commerce listed modern logistics in industries encouraged for foreign investment. And China was listed as one of the most important logistics markets in the world by a number of foreign logistics enterprises.

In recent years, international logistics enterprises constantly increase the investment in China and speed up logistics network expansion. Currently, China has become an important overseas market for various international logistics enterprises, and the number of international logistics enterprises in China increases. International logistics enterprises speed up mergers of large-scale logistics enterprises and provide increasingly abundant services in various forms(joint ventures/mergers, especially with large private logistics enterprises). At present, multinational logistics enterprises have formed strategic superiority in air freight field, while that in express delivery has been initially formed. Following port, parks and transit center, domestic airports become new investment spots for foreign investors, who are optimistic about investment in China's domestic airports in the long term. In recent years, foreign industrial estate developers bring in new development mode of logistics estate, break original market pattern, accelerate transformation, reorganization and upgrade of China's logistics industry, and also bring competition to China's local logistics enterprises.

International operation is an important way for local logistics enterprises to tackle the international competition. It will be the development direction for China's local logistics giants to explore multinational service demand of domestic and overseas clients with local advantages, provide powerful support of logistics and supply chain management for domestic clients to expand business overseas, and offer complete localized logistics and supply chain solutions. In fact, local logistics enterprises represented by COSCO Logistics and Sinotrans Logistics are improving their services to enhance their competitiveness. For instance, COSCO Logistics emphasizes on high value-added supply chain and logistics service related to the shipping industry and transnational transportation. On the basis of storage resources, China National Materials Storage and Transportation Logistics Co., Ltd. form comprehensive logistics business mode efficiently combining spot market, movable property supervision, bulk trade, processing and distribution with freight agency.

In China, foreign logistics giants like Maersk, ProLogis and four international express giants successively adopt more sound and pragmatic business strategies. The innovative and value-added services of many foreign logistics enterprises such as vendor managed inventory, supply chain finance and logistics in duty-free zones show powerful risk resistance capacity.

The main business revenue of China's top 50 logistics enterprises totaled CNY 450.60 billion in 2009 with a slight decrease over 2008. Among China's top 50 logistics enterprises, the main business revenue of COSCO Group exceeded CNY 100 billion, and that of 9 enterprises represented by Sinotrans Shipping Limited exceeded CNY 10 billion. The average main business revenue of China's top 50 logistics enterprises in 2009 exceeded CNY 1 billion, among which the 50th logistics enterprise's main business revenue reached CNY 1,219.70 million.

Through this report, readers can acquire more following information:
-Development status of China's logistics industry
-Key enterprises of China's logistics industry and their operations
-Investment opportunities in China's logistics industry
-Prediction on development trend of China's logistics industry

Following people are suggested to buy this report:
-Road, railway and air transport enterprises
-China's local logistics enterprises
-Foreign logistics enterprises concerned about China's logistics industry
-Port and airport
-Storage enterprises
-Investors concerned about China's logistics industry
-Research institutions concerned about China's logistics industry

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Tuesday, December 28, 2010

Walmart invests in China’s 360buy.com

Walmart, the world’s largest retailer by sales, has invested in China’s largest e-commerce consumer electronics seller, 360buy.com, in a move that underlines the growing interest of global retailers in China’s rapidly growing online market.

The retailer was one of six investors in a round of funding that raised $500m for 360buy, whose rivals include Taobao, the dominant online marketplace owned by Alibaba.
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Walmart has about 300 stores in China. Its Sam’s Club discount warehouse business launched its own e-commerce business there in November, using a new global platform that it has built over the past two years.

The retailer has taken similar minority stakes with fledgling e-commerce businesses in the US that it has also worked with, including 1-800-Contacts, a contact lens retailer, and Green Dot, the web-based payments and financial company.

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Wednesday, October 27, 2010

China official sees room for U.S. trade target: FT

HONG KONG (MarketWatch) -- China and the U.S. have the basis for a pact setting specific targets to cut their trade imbalance at next month's Group of 20 nations summit, according to a senior adviser to the Chinese central bank quoted in a Financial Times report Wednesday. "China should not be afraid of numerical targets for reducing its trade surplus," said Li Daokui, a member of the People's Bank of China's monetary policy committee, according to the report. "China is well positioned politically and economically to make this adjustment." Li's comment came after PBOC Deputy Gov. Yi Gang was quoted as saying in media reports earlier this month that China planned to cut its current-account surplus to 4% of its gross domestic product in the next three to five years. In 2009, China's current-account surplus fell to 5.8% of its GDP, down from 9.4% in 2008, as the nation's exports fell and on strong imports.

By V. Phani Kumar

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Friday, June 25, 2010

Chinese factories struggle as wages rise ‎

SHENZHEN, China Caixin Online -- Standing in a light rain, dozens of young men and women quietly waited at the closed gates of a Foxconn Technology Group recruiting office.

One woman said she'd traveled from another electronics company factory nearby to check out Foxconn's offer to increase salaries by up to 2,000 yuan ($295) a month. She called that kind of pay "unbelievable" for an electronics plant in China's Pearl River Delta.

The kind of work performed at Foxconn and her factory "is the same," the woman said. But the pay is not.

"I can only make 900 yuan there, so I'd like to quit and come over here and try."

Nevertheless, a notice posted at the recruitment office suggested a long and perhaps fruitless wait for the woman, as well as the other job hopefuls parked in the rain. The notice is also one reason why rumors, misunderstandings and doubts about Foxconn's salary increases have been brewing in Shenzhen and the rest of the Pearl River Delta, a major manufacturing base, for weeks.

Foxconn, the notice said, had temporarily suspended hiring May 29, more than a week before it announced June 7 that it would pay substantially more to qualified, front-line operators who pass a three-month assessment.

The hiring freeze also came just a few days before the company had implemented a one-time minimum-wage increase of more than 33% to 1,200 yuan a month. The rise was increased to 66% in a week.

These were unusually steep pay increases for Foxconn, China's largest contract manufacturer, which produces goods for Apple and other electronics giants. Yet the pay hikes followed 10 suicides and three unsuccessful attempted suicides at the company's sprawling Shenzhen campus since January.

Some blamed labor conditions for the suicides. And conditions among factory workers, particularly migrant workers, across China sparked similar discontent far beyond Foxconn. Workers at the Nanhai Honda factory in Foshan, for example, recently went on strike for two weeks and won a 35% pay raise.

Will more labor strife follow? Zhuang Li, vice president of Dongguan City Dalingshan Town Jutong Electronics Factory, doesn't think workers should get their hopes up.

"Widespread salary increases are unlikely," Zhuang said. "We won't follow the trend of increasing wages."

Strikes and other forms of labor-management friction are said to be hurting labor-cost advantages in China. And yet it appears to be dawning on Pearl River companies that the popular business model that's worked so well for years in the region -- a model based on low salaries and few worker benefits -- is coming to a close.

Revaluing labor

June 7 was a payday at Foxconn unlike paydays in the past. Luo Jun, a migrant worker at the factory said in the past a lot of employees simply picked up their cash and left. But this time "now that they say there is a raise," Luo said, "no one is leaving."

The 2,000 yuan base wage combined with overtime would allow front-line workers to make as much as 3,600 yuan per month. That's not much less than the average income for all Shenzhen residents last year, potentially reversing what was historically a wide gap between salaries for migrant and local workers.

A 2008 report, for example, said migrant workers earned only 27% of local workers' salaries in the city. The gap was widening, even as manufacturer earnings rose.

Wages in the delta region started climbing after the government implemented a new labor contract law in 2008. The most recent adjustment May 1 brought the region's four, minimum-wage standards over the past two years to levels that were up 30%.

Not all companies follow the wage rules. Liu Kaiming, director of the Shenzhen Institute of Contemporary Observation, said 90% of the factories he surveyed, regardless of size, file false salary reports with the local labor department and their customers. Numbers are fudged to make it seem they are paying minimum salaries.

Meanwhile, labor disputes have been on the rise. Liu reported in February that 52,140 labor dispute cases were reported in Shenzhen in 2008 -- 7.45% of the total number of cases nationwide. Most were related to migrant workers, and primary issues included late paychecks, excessive overtime and unpaid overtime.

Challenges for business

The Pearl River Delta was the first region to accept migrant workers and now hosts more than anywhere in China. Between 1986 and 2008, more than 300 million migrants have worked or currently work in the region.

These masses of low-paid migrant workers helped the region become a factory to the world over the past 30 years. Since the global financial crisis and an ensuing decline in exports, many migrants returned to homes in China's interior.

Labor shortages have been reported since last summer. A global economic rebound rekindled export orders. At the same time, companies in the region came under increased pressure to increase wages to attract workers.

The first to feel the pain were the business owners who had benefited from years of cheap labor.

This is the case for Zhuang's company, which is part of Taiwan's Taihua Group and has been making products such as stereos speakers and computer peripherals for Sony, Yamaha and other international companies since 1988.

Zhuang told Caixin the company raised its base salary 20% May 1. As a result, wages have grown to 12% from 8% of the company's costs, squeezing margins.

Zhuang said 90% of customer payments went toward wages and other costs. Customers are unwilling to pay more, even though labor costs are rising, and so the factory will post a loss of 2% to 3% this year.

The dean of Zhongshan University's Finance and Taxation Department, Ren Linjiang, said business is not necessarily bright for the Pearl River Delta's export manufacturers. Productivity has not recovered, he said, and rising wages will hike costs to levels that are unlikely to fall.

Foxconn strategy

As China's largest export company, Foxconn enjoys far greater flexibility than other manufacturers in the region. It has an advantage over others since, as one of the company's suppliers said, "only the biggest can survive" in the current competitive landscape.

Foxconn is one of a few leading companies that can set prices. Moreover, it can reduce the use of manual labor through automation or by relocating production to areas with lower labor costs.

The rating agency Standard & Poor's showed confidence in Foxconn, citing no plans to adjust the rating of Foxconn parent Hon Hai Precision despite the latest wage increases.

In fact, the raises appear to be a shift in strategy for Foxconn Chairman Terry Guo. "He simply added 66%" of wages "and will see how other factories react," said Wu Zhihao, marketing vice president at Shihlin Electric & Electronics Corp. "He has to raise wages this time, or there would be strikes."

So by significantly raising wages Guo "passed the ball to other companies and regained the initiative," Wu said.

And that's left most companies in the region facing a tough dilemma: Labor expenses have been the only elastic, controllable component of their business, but higher wages reduce this option's effectiveness and may cut competitiveness.

To avoid being squeezed out, companies may have to find new strategies. These may include automation, hiking productivity and reducing manual labor. Some companies have started considering factory relocations as well, although such moves are complicated.

Governments outside the Chinese mainland are trying to attract businesses. For example, the Taiwan Ministry of Economic Affairs is currently helping Foxconn find land on the island, discussing investment plans, and working to assist with utility, labor and other cost issues.

But Zhuang said although his company's officials have visited potential factory sites in Jiangxi and Guangxi provinces, as well as Vietnam and India, none of the alternative sites seemed a good fit.

"If you move, your raw material suppliers can't necessarily accommodate you," he explained.

Moreover, years of development has created solid supply chains in the Pearl River Delta and Yangtze River Delta manufacturing regions. As a result, low-cost materials can be obtained within 100 kilometers of many factories in these areas, encouraging companies to stay.

Labor upgrades

From a labor perspective, the latest wage increases have been a positive development. For example, Liu Kaiming of the Shenzhen Institute of Contemporary Observation applauded the salary increases.

"It's time for workers to receive reasonable compensation," Liu said, particularly since the blue-collar workforce market is shrinking.

In the current environment "companies are forced to constantly offer higher wages," he said. "The difference in incomes between white-collar and blue-collar jobs will be reduced."

Yet pay raises need not sound a death knell for manufacturing in China.

Associate Professor Lu Huilin of Peking University's Sociology Department said reasonable raises for workers will "not affect China's status as the world's factory" but rather "increase the number of value-added jobs" so that the "Made in China" label on manufactured products also becomes "Created in China."

Successful economic development in other Asian countries provides valuable lessons. Liu said countries such as South Korea adopted an export-oriented development strategy while actively investing in worker education and benefits and encouraging workers to move from the countryside to industrial and urban areas.

Blue-collar workers in these countries were able to share the fruits of national economic development, improving living conditions for their families, giving them dignity and providing education for their children. Ultimately, improved worker benefits raised innovation capacities.

If conditions for Chinese workers improve as well, while companies adjust to new realities of migrant labor and climbing wages, China's factories could enjoy a bright future. And workers at the Foxconn factory gate would see the benefits of waiting in the rain.


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