Archive for October, 2014

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26/10/2014

Wal-Mart Struggles to Crack Retail Market in India – Businessweek

As Indians celebrate the Hindu festival of Diwali, executives at Wal-Mart India don’t have much reason to cheer. The company is still waiting for its big breakthrough in India, a market it has been trying to crack at least since 2007. That’s when the American retailer teamed up with one of the top businessmen in the country, Sunil Mittal, to open wholesale stores in India. If all had gone well, that partnership with Bharti Enterprises was supposed to have led to consumer-facing stores, too.

A Wal-Mart store on the outskirts of Chandigarh, Punjab, India, on June 10

When then-Prime Minister Manmohan Singh in 2012 eased restrictions on foreign ownership in retail, Wal-Mart Stores (WMT) executives saw an opportunity in the world’s second-largest country. In September 2012, a Wal-Mart executive told Bloomberg News the two sides were in talks and retail stores were less than two years away.

Those discussions didn’t end well. Wal-Mart and Bharti Enterprises went their separate ways last year, dissolving the joint venture in October 2013. Wal-Mart bought out Bharti and took full control of the 20 members-only, cash-and-carry stores in India. After that, the company largely kept its India plans on hold: It’s been two years since Wal-Mart added new wholesale stores in India.

via Wal-Mart Struggles to Crack Retail Market in India – Businessweek.

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26/10/2014

China GDP Growth of Just 4 percent is possible – Businessweek

China reported on Tuesday that its economic growth fell to a five-year low. But one forecaster says that’s just the beginning. This week the Conference Board issued a 75-page white paper predicting that China’s annual growth will dip below 4 percent in the next decade. Its title: The Long Soft Fall in Chinese Growth.

I met on Monday with the report’s authors, David Hoffman and Andrew Polk, and asked why they’re so pessimistic on China. They said it’s a straightforward projection of recent slowdowns in the growth of capital investment, labor productivity, and the quantity and quality of the labor force.

It’s the optimists who need to defend their case, according to Hoffman, because the only way to project continued 7 percent growth for China is to project major output-enhancing economic reforms. “We just don’t think that will happen,” says Hoffman, who manages the Conference Board China Center for Economics and Business in Beijing.

via China GDP Growth of Just 4 percent is possible – Businessweek.

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26/10/2014

China’s Rising Wages and the ‘Made in USA’ Revival – Businessweek

It wasn’t long ago that China was the cheapest place on earth to make just about anything. When China joined the World Trade Organization in 2001, the average hourly manufacturing wage in the Yangtze River Delta was 82¢ an hour. Oil was $20 a barrel, so no matter where you were ultimately selling your Chinese-made goods, it didn’t cost much to get it there.

A technician prepares a VIPturbo Modem at the SRT Wireless satellite communications manufacturing plant in Davie, Florida on Aug. 18

China’s still cheap, but it’s nowhere near the deal it was just a few years ago. Workers in the Yangtze make almost $5 an hour today, and oil costs about $85 a barrel. Suddenly the benefits of making things in China aren’t so apparent, especially if you’re selling those things to consumers in the U.S. A new survey by Boston Consulting Group found that 16 percent of American manufacturing executives say they’re already bringing production back home from China. That’s up from 13 percent a year ago. Twenty percent said they would consider doing so in the near future.

American manufacturing’s increased competitiveness against China is a story that’s been told for a few years now, giving rise to the term “reshoring.” But it’s not just China that the U.S. is gaining against. For companies making goods for sale in the U.S., Mexico has long been the place to go—and that’s slipping, too. The BCG survey shows that the U.S. has passed Mexico as the place where companies are most likely to build a new plant to make things to sell in the U.S.

via China’s Rising Wages and the ‘Made in USA’ Revival – Businessweek.

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26/10/2014

Frustrated Multinationals Look to Trim China-Based Staff – Businessweek

Slightly less than half of European companies operating in China plan to expand their mainland-based workforce in the next year—down from 61 percent in 2012, according to a recent survey by the European Chamber of Commerce. A quarter of these entities are looking for other ways to trim costs in China, and 51 percent believe doing business in China “has become more difficult” over the past few years.

The workshop of Bernard Controls, a French business that manufactures electric components in Beijing

Business isn’t typically bad—61 percent said their China operations were profitable—but it’s less spectacular than in past years. That’s due in part to China’s economic slowdown, in part to real and perceived hostility against foreign companies in China, and in part to problems or layoffs in their home offices.

American companies expressed similar concerns in a recent survey by the U.S. Chamber of Commerce. Fully 60 percent of U.S. businesses said they felt “less welcome” in China than in the previous year. Anticorruption and pricing probes in wide-ranging industries have seemingly singled out foreign companies, from Microsoft (MSFT) to Abbott Laboratories (ABT), as targets. Almost half of those surveyed said they thought the pattern of harassment was deliberate.

via Frustrated Multinationals Look to Trim China-Based Staff – Businessweek.

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26/10/2014

Three major nations absent as China launches World Bank rival in Asia | Reuters

Australia, Indonesia and South Korea skipped the launch of a China-backed Asian infrastructure bank on Friday as the United States said it had concerns about the new rival to Western-dominated multilateral lenders.

China's President Xi Jinping (R) meets with the guests at the Asian Infrastructure Investment Bank launch ceremony at the Great Hall of the People in Beijing October 24, 2014. REUTERS/Takaki Yajima/Pool

China’s $50 billion Asian Infrastructure Investment Bank(AIIB) is seen as a challenge to the World Bank and Asian Development Bank, both of which count Washington and its allies as their biggest financial backers.

China, which is keen to extend its influence and soft power in the region, has limited voting rights in these existing banks despite being the world’s second-largest economy.

The AIIB, launched in Beijing at a ceremony attended by Chinese finance minister Lou Jiwei and delegates from 21 countries including India, Thailand and Malaysia, aims to give project loans to developing nations. China is set to be its largest shareholder with a stake of up to 50 percent.

Indonesia was not present and neither were South Korea and Australia, according to a pool report.

Japan, China’s main rival in Asia and which dominates the $175 billion Asian Development Bank along with the United States, was also not present, but it was not expected to be.

Media reports said U.S. Secretary of State John Kerry put pressure on Australia to stay out of the AIIB.

However, State Department spokeswoman Jen Psaki said: “Secretary Kerry has made clear directly to the Chinese as well as to other partners that we ‎welcome the idea of an infrastructure bank for Asia but we strongly urge that it meet international standards of governance and transparency.

“We have concerns about the ambiguous nature of the AIIB proposal as it currently stands, that we have also expressed publicly.”

In a speech to delegates after the inauguration, Chinese President Xi Jinping said the new bank would use the best practices of the World Bank and the Asian Development Bank.

“For the AIIB, its operation needs to follow multilateral rules and procedures,” Xi said. “We have also to learn from the World Bank and the Asian Development Bank and other existing multilateral development institutions in their good practices and useful experiences.”

via Three major nations absent as China launches World Bank rival in Asia | Reuters.

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22/10/2014

Google’s Big Plans for Low-Cost Android One Phones in India – Businessweek

With the Indian smartphone market booming, Xiaomi has made a splash with its weekly flash sales on Flipkart, an Indian rival to Amazon.com (AMZN). When the Chinese smartphone brand conducted another of its sales on Tuesday, over 300,000 people registered to buy some 90,000 of its Redmi 1S phones priced at 5,999 rupees (or $98). In last week’s sale, the Xiaomi phones sold out in four seconds.

The Spice Android One Dream Uno smartphone

Xiaomi isn’t the only foreign company looking to take advantage of consumer demand for inexpensive alternatives to the iPhone (AAPL). The company with perhaps the most ambitious plan is Google (GOOG), which last month made India the first market for its new Android One smartphone operating system. Google teamed up with local brands Micromax, Karbonn, and Spice, all of which have recently introduced smartphones priced around 6,000 rupees.

India particularly needs better low-cost phones, argues Caesar Sengupta, Google’s vice president of product development in Singapore and head of the Android One project. India’s mobile operators don’t offer the sort of generous subsidies that consumers in the U.S. and other markets take for granted. ”In the U.S., when you buy an iPhone, it costs $600 to $700 but you get a subsidy, so to a consumer it feels you are buying a $200 phone,” Sengupta says. In India, the cost to the consumer is much closer to the actual cost of the hardware.

via Google’s Big Plans for Low-Cost Android One Phones in India – Businessweek.

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22/10/2014

India’s Modi Ends Fuel Subsidies, Showing He Is a Reformer – Businessweek

Narendra Modi has proven once again how important it is to be lucky in politics. In the spring, he was India’s opposition leader, running for prime minister by focusing on the government’s mismanagement of the economy. He had plenty of ammunition: The coalition led by the Congress Party had presided over years of corruption scandals and stalled reforms—and also had to contend with a growing budget deficit fueled by soaring prices for oil and other imported commodities.

In India, Falling Oil Prices Make Modi's Job Much Easier

During the campaign, Modi said he wanted to cut back on the costly subsidies the government offered millions of Indians to cushion the blow of those soaring prices. Petroleum subsidies account for one-quarter of India’s 2.6 trillion rupee ($42.4 billion) subsidies bill. But after he won in a landslide, Modi’s first budget (which his finance minister announced in July), was a modest plan that left the subsidies untouched.

That left observers unsure as to whether Modi was backing away from the politically difficult task of making the cuts. “We can either trust that the government will deliver price hikes as the year progresses,” Mirza Baig, head of foreign exchange and interest rate strategy at BNP Paribas in Singapore, wrote in a report after the budget announcement in July. “Or we can be more cynical and suggest that the Modi administration intends to continue the practice of rolling forward subsidy expenditure to next year.”

via India’s Modi Ends Fuel Subsidies, Showing He Is a Reformer – Businessweek.

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22/10/2014

Facebook’s Zuckerberg Gets a Toehold in China – Businessweek

In its quest to dominate the social media industry worldwide, Facebook (FB) has long hankered after China, where the company been been banned since 2009. Facebook may have just gained a foothold to help it infiltrate the Chinese market: the appointment of Chief Executive Officer Mark Zuckerberg to the board of one of China’s top business schools, the Tsinghua University School of Economics and Management.

Tsinghua University in Beijing

Tsinghua University announced Zuckerberg’s appointment on Monday to the school’s board, a meeting ground of sorts for Western corporate higher-ups and Chinese officials. In addition to Zuckerberg and top brass from IBM (IBM) , Anheuser-Busch InBev (BUD), and other multinationals, it includes Chinese government officials and entrepreneurs tasked with advising Tsinghua SEM’s development.

To the business school, Zuckerberg is an impressive name to add to a cadre of corporate superpowers. To Zuckerberg, who will fly to Beijing this week to attend the school’s annual board meeting, the appointment could provide an additional way for Facebook to make its case for reentering China, analysts say.

via Facebook’s Zuckerberg Gets a Toehold in China – Businessweek.

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22/10/2014

Diesel Deregulation Frees Up Billions for India to Spend More Wisely – India Real Time – WSJ

India’s decision to end government control of diesel fuel prices will save the government billions of dollars which can be better spent on more pressing needs such as building schools, roads and ports, analysts say.

India announced over the weekend that it would end a decades-old policy of controlling the retail price of diesel fuel. Providing diesel at below-market rates cost the government about $10 billion last year, hampering India’s ability to spend on other things.

The government had given up control over the prices of gasoline back in 2010 but had continued to regulate prices of diesel – the primary fuel used in trucks and tractors as well as for running generators used to power irrigation pumps.

“It shields the government’s finances from volatility in global oil prices, because of which the subsidy bill often went up,” said Radhika Rao, an economist at DBS Bank.

HSBC estimates that the diesel deregulation will drop fuel subsidy bill to around 0.4% of gross domestic product, half of the 0.8% of GDP it paid last year.

“Our estimate is that over the next few years, fuel subsidies should remain contained,” said Prithviraj Srinivas, an economist at HSBC.

Diesel subsidies cost India close to $50 billion over the last five years, economists say. If India sticks to its guns and lets fuel prices meander with global markets, it will no longer have to foot that kind of unproductive expense. Instead, it can now choose to lower its fiscal deficit or spend more on infrastructure development or social development programs.

Analysts say the government’s fiscal deficit target of 4.1% of GDP this fiscal year – a level that many analysts had thought optimistic – now looks within reach.

via Diesel Deregulation Frees Up Billions for India to Spend More Wisely – India Real Time – WSJ.

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22/10/2014

Airbus Helicopters expects China to become biggest market by 2020 | Reuters

Airbus Helicopters, the world’s largest civil helicopter maker, expects China and Hong Kong to become its biggest global market within six years as Beijing starts to lift restrictions on the use of low altitude airspace from 2015.

A general view of an EC145 helicopter being assembled at the Airbus production facility in Donauwoerth, Southern Germany October 9, 2014. REUTERS/Michaela Rehle

The Airbus Group NV’s (AIR.PA) helicopter division expects to increase its annual sales in China to 150 units by 2020 from around 30-40 helicopters now, its China president Norbert Ducrot told Reuters.

Sales in the United States, the firm’s biggest market, average around 120-150 aircraft per year.

“The China market is very small with a big potential,” Ducrot said in an interview in Beijing. “I am pretty sure around 2020, China will be the first market for Airbus Helicopters.”

“Before (our customers) were mostly state companies, police and fire fighting, but now we can see the emergence of civil private helicopter operators,” he added.

China simplified flight approval procedures for private aircraft late last year, but the fledgling market for helicopters and small aircraft has been constrained by the military’s control of low altitude airspace.

A dearth of small airports, maintenance facilities, mechanics and pilots have also hampered the sector’s growth.

Ducrot said he expects demand for helicopters and small aircraft to pick up gradually when China starts to open up its low altitude airspace next year.

As infrastructure improves and the military opens up more airspace by 2020, Ducrot estimates there will be 50,000 helicopters in China over the next 30 years. There are only about 330 helicopters currently in operation in China, including Hong Kong.

via Airbus Helicopters expects China to become biggest market by 2020 | Reuters.

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