Archive for ‘Economics’

27/01/2015

Taobao cries foul over study’s claim that it sells fake, substandard goods | South China Morning Post

China’s largest online shopping platform Taobao.com has hit back at the results of an official quality survey that accused it of selling fake and substandard goods, saying that the poll’s sampling methods were questionable and its test standards unfair.

Taobao cries foul over study’s claim that it sells fake, substandard goods

More than 60 per cent of products randomly chosen from Taobao failed to meet China’s retail-goods standards, according to a recent survey commissioned by the state commercial regulator and conducted by the China Consumers’ Association.

In an open letter published on Taobao’s Weibo account, the e-commerce giant said the survey selected only 51 products out of the more than 1 billion that it had on sale.

It also said it was unfair of the State Administration of Industry and Commerce to compare the quality of goods sold on Taobao – whose platform comprises millions of e-commerce businesses operated by individual sellers – with those sold by self-operated retailers.

One of China’s major self-operated e-commerce businesses is Taobao’s major rival, Jingdong Mall. It is also the country’s second largest online shopping platform. The survey results showed that 90 per cent of Jingdong Mall’s products met official standards.

About 80 per cent of goods sold on Yihaodian, a Chinese online grocery business controlled by Walmart, met standards.

Taobao’s open letter, titled “Don’t “Don’t make unfair calls, Director Liu Hongliang. You’ve crossed the line”, was penned by an anonymous employee, Taobao said on Weibo.

The letter addressed State Administration for Industry and Commerce director Liu Hongliang, accusing him of making public the survey results without giving the online shop owners a chance to appeal. The move violated China’s regulations on quality surveys, it said.

“Director Liu, is it appropriate to make use of your public power [like this]? It’s easy to ruin [the reputation of] Taobao, but please don’t ruin the spirit of private entrepreneurs simply because [you are angry with] Taobao,” the letter said.

Chinese officials, including Premier Li Keqiang, have over the past year repeatedly voiced support for the country’s burgeoning private enterprises, especially those in the e-commerce sector.

At least 350 million people have shopped online in China, with each spending at least 3,000 yuan (HK$3,770), according to official statistics.

via Taobao cries foul over study’s claim that it sells fake, substandard goods | South China Morning Post.

27/01/2015

New highway encircles stubborn homeowners – Chinadaily.com.cn

A room with a 360-degree road view

New highway encircles stubborn homeowners

If you can’t build through it, build around it – city planners seem to have taken this advice quite literally.

Motorway builders encircled the homes of three Chinese families with a four-lane flyover after they refused to make way for the bulldozers.

Demolition teams in Guangzhou had planned to destroy the houses in order to connect the city’s road network to a recently opened tunnel under the Pearl River.

A photograph of the so-called “nail houses” – so named because they proved difficult to move–completely surrounded by the flyover, proved popular on the Chinese Internet this week.

Some Internet users joked that authorities had given locals homes “with a 360-degree road view”.

via New highway encircles stubborn homeowners[1]- Chinadaily.com.cn.

27/01/2015

China’s Top 100 Brands: The Private Sector Reigns Supreme – China Real Time Report – WSJ

China’s top brand is no longer a state-owned company, nor is it e-commerce giant Alibaba Group Holding Ltd.BABA +0.85% It’s technology player Tencent Holdings TCEHY +3.45%.

In a ranking of the top 100 most valuable Chinese brands by research from agency Millward Brown and media company WPP, Tencent,  China’s largest online-games and social-networking company, ranked No. 1 with a brand value of $66 billion, ahead of No. 2 Alibaba’s $59 billion. Tencent’s WeChat and QQ messaging services propelled it to the top of the list, said Doreen Wang, global head of Millward Brown’s BrandZ division.

Tencent’s rise unseats state-owned telecom giant China Mobile, which has held the top spot since the ranking’s launch in 2010. It also marks a sea change for China’s private-sector companies, which now account for 47% of the value of the top 100 brands. To calculate rankings, Millward Brown and WPP analyze financial data of listed companies’ brands, pairing it with survey data from more than two million consumers in over 30 countries.

China’s state-owned enterprises have long dominated China’s list of leading companies. In 2010, of the top 50 Chinese brands identified in the report, state-owned companies occupied a third of the list and accounted for an estimated 70-75% of the $280 billion total combined value of the top 50.

Today, it’s a different story. In the past year, the government as has pushed private sector reforms and talked about the need to let market forces play a “more decisive” role in the economy. Alibaba’s public listing last year also contributed to the jump in value for market-driven brands, Millward Brown said, adding that technology brands have also for the first time surpassed financial institutions, becoming the highest valued sector in the rankings, representing 23% of the top 100’s value. Search giant Baidu Inc.BIDU -1.66% ranked No. 5, behind China Mobile and Industrial & Commercial Bank of China Ltd.

Tencent now ranks fifth in the world for global technology leaders’ brand value, according to MIllward Brown. Google Inc. is No. 1 with $158.8 billion, with Apple Inc. holding the No. 2 spot, followed by International Business Machines Corp.and Microsoft Corp.

Yet, even with Alibaba’s record-setting IPO and Tencent’s various successes, Chinese brands haven’t gained global recognition, said Ms. Wang. Only 22% of consumers surveyed outside of China could recognize a Chinese brand in 2014, a slight rise from 20% the year earlier. Chinese brands need to clarify what they stand for and need to ensure that they can satisfy needs beyond the Chinese market for them to gain more recognition, said Ms. Wang. “They need to consider what kind of benefit they bring to global consumers,” she said.

via China’s Top 100 Brands: The Private Sector Reigns Supreme – China Real Time Report – WSJ.

27/01/2015

Obama ends day of Indian pageantry with $4 billion pledge | Reuters

U.S. President Barack Obama ended a landmark day in India on Monday with a pledge of $4 billion in investments and loans, seeking to release what he called the “untapped potential” of a business and strategic partnership between the world’s largest democracies.

Honeywell CEO Dave Cote (L) and India's Prime Minister Narendra Modi (C) laugh at a remark by U.S. President Barack Obama (R) during a CEO Roundtable and Forum at the India U.S. Business Summit in New Delhi January 26, 2015. REUTERS-Jim Bourg

Earlier in the day, at the invitation of Prime Minister Narendra Modi, Obama was the first U.S. president to attend India’s annual Republic Day parade, a show of military might that has been associated with Cold War anti-Americanism.

It rained as troops, tanks and cultural floats filed through the heart of New Delhi, but excitement nevertheless ran high over Obama’s visit, which began on Sunday with a clutch of deals to unlock billions of dollars in nuclear trade and to deepen defence ties.

Both sides hope to build enough momentum to forge a relationship that will help balance China’s rise by catapulting democratic India into the league of major world powers.

The leaders talked on first name terms, recorded a radio programme together and spent hours speaking at different events, but despite the bonhomie, Obama and Modi reminded business leaders, including the head of PepsiCo, that trade ties were still fragile.

India accounts for only 2 percent of U.S. imports and one percent of its exports, Obama said. While annual bilateral trade had reached $100 billion, that is less than a fifth of U.S. trade with China.

via Obama ends day of Indian pageantry with $4 billion pledge | Reuters.

27/01/2015

Apple supplier Foxconn to shrink workforce as sales growth stalls | Reuters

Is this the beginning of the end for off-shoring manufacturing?

Taiwan‘s Foxconn Technology Group, the world’s largest contract electronics manufacturer, will cut its massive workforce, the company told Reuters, as the Apple Inc (AAPL.O) supplier faces declining revenue growth and rising wages in China.

Employees work inside a Foxconn factory in the township of Longhua in the southern Guangdong province in this May 26, 2010 file photo.  REUTERS/Bobby Yip

Under its flagship unit Hon Hai Precision Industry Co Ltd (2317.TW), the group currently employs about 1.3 million people during peak production times, making it one of the largest private employers in the world.

Special assistant to the chairman and group spokesman Louis Woo did not specify a timeframe or target for the reduction, but noted that labor costs had more than doubled since 2010, when the company faced intense media scrutiny following a spate of worker suicides.

“We’ve basically stabilized (our workforce) in the last three years,” Woo said. When asked if the company plans to reduce overall headcount, he responded “yes”.

Revenue growth at the conglomerate tumbled to 1.3 percent in 2013 and only partially recovered to 6.5 percent last year after a long string of double-digit increases from 2003 to 2012.

That decade saw the firm ride an explosion of popularity in PCs, smartphones and tablets, largely driven by its main client Apple, but now it is feeling the effects of falling growth and prices in the gadget markets it supplies, a trend that is expected to continue.

Growth in smartphone sales will halve this year from 26 percent in 2014, according to researcher IDC, while PC sales will contract by 3 percent.

Similarly, the average smartphone will sell for 19 percent less in 2018 than last year’s $297.

“Even if technology is improving, the price will still come down,” Woo said. “We’ve come to accept that, our customers have come to accept that.”

Automation will be key to keeping labor costs under control in the long-term, Woo said, as the company pushes to have robotic arms complete mundane tasks currently done by workers.

But Woo noted that company chairman Terry Gou‘s previously stated goal of 1 million robots was “a generic concept” rather than a firm target.”

via Exclusive: Apple supplier Foxconn to shrink workforce as sales growth stalls | Reuters.

26/01/2015

Govt sells off premium cars- Chinadaily.com.cn

The first group of premium government automobiles to be auctioned off amid the ongoing frugality campaign have gone under the hammer in Beijing.

Govt sells off premium cars

According to Zonto Auction, the 106 vehicles it sold on Sunday were from six central government departments including the China Insurance Regulatory Commission, China Securities Regulatory Commission and State Bureau for Letters and Calls.

The cars were without plates, which would have to be supplied by the purchasers.

A total of 505 bidders from around the country joined the auction, which brought in proceeds of 6.6 million yuan ($980,000).

The highest bid went to a Toyota cross country vehicle for 200,000 yuan.

Li Guanwen, 40, of Hebei province, bought a Skoda bus for 160,000 yuan.

“The market value of this bus is around 500,000 yuan,” said Li.

“I think the reform of official vehicles is a very good thing and is a very good approach to remind civil servants to cut costs and to serve the public well.”

In November 2013, public agencies were told to cut their vehicle fleets, as well as reduce receptions and overseas trips. The use of all vehicles, except those required for law enforcement, emergency duties and essential public services, were scrapped or severely reduced.

via Govt sells off premium cars[1]- Chinadaily.com.cn.

26/01/2015

Urbanisation: The great sprawl of China | The Economist

IN ANCIENT times, Beijing built towering city walls that helped to prevent undefendable sprawl. These days it builds ring roads, stretching built-up areas ever outwards. Near Langfang, a city halfway between the capital and its giant neighbour Tianjin, diggers dip their heads and cement mixers churn, paving the next circular expressway. When complete, the 900km (560-mile) Seventh Ring Road will surround Beijing at such a distance that most of it will run through the neighbouring province of Hebei, to which Langfang belongs, rather than the capital itself. Parts of it are 175km from Beijing’s centre (see map).

The Seventh Ring Road (really the sixth, but for obscure reasons there is no First Ring Road) is emblematic of modern Chinese cities: giant, sprawling and dominated by cars. Even before it is completed in a year or two (and its use assessed), another, even longer, orbital is being plotted. Like many of China’s infrastructure projects, the new road displays engineering prowess. The country’s successes in urban planning are less evident.

Breakneck urban growth has propelled China’s rise in the past three decades. Migration from the countryside has helped expand the urban population by 500m—the biggest movement of humanity the planet has seen in such a short time. Over half the population is now urban. Some live in the basements of apartment blocks, or in shacks built in courtyards. But Chinese cities have mostly avoided the squalor of many developing-world ones.

The result of this urban growth is not just that China has many large cities—more than 100 of them have more than a million people—but that some are supersized. At the end of last year the government at last acknowledged the special nature of these, introducing the term “megacity” to describe those whose populations, including that of their satellite towns, exceed 10m. Of the 30 cities worldwide that match this definition, six are in China: Shanghai (23m), Beijing (19.5m), Chongqing (13m), Guangzhou (12m), Shenzhen (11m) and Tianjin (11m). A further ten Chinese cities contain 5m-10m people. At least one of these, Wuhan, will pass 10m within a decade.

China depends on its cities for economic growth and innovation. But it is failing to make the most of its largest conurbations. Medium-sized agglomerations of 1.5m-6.5m are outperforming bigger ones in terms of environmental protection, economic development, efficient use of resources and the provision of welfare, says McKinsey, a consultancy. Residents are beginning to question whether their quality of life, which for many has improved by leaps and bounds, will continue to do so. The giant cities are polluted, pricey and congested. Average travel speed in Beijing is half that in New York or Singapore.

Most of China’s cities share the legacy of a central-planning mindset in which all life and work was centred on a single “work unit”. Cities were “built as producer centres rather than consumer ones”, says Tom Miller, author of “China’s Urban Billion”. Their planning focus was on industry; not commerce, services or even community. The work units are gone but the tradition of dehumanising architecture persists. Most new developments are built on giant blocks 400-800 metres long.

China has swapped its socialist dream for an American-style one of cars and sprawling suburbs. The number of cars has increased more than tenfold in the past decade, to 64m. The combination of superblocks and car-lust often adds up to a giant jam. Large blocks mean fewer roads to disperse traffic. Guidelines require a main urban road every 500 metres and an eight-lane road every kilometre. In the case of Beijing, a ring and radial system was also created, with the aim of providing speedy road access in and out of town, bypassing city traffic and linking satellite towns. Not a bad idea, except that workplaces have remained concentrated in the centre. The expressways funnel traffic into gridlock.

The ill-defined ownership rights of farmers have encouraged the sprawl. Officials can expropriate rural land easily and at little cost. Doing so is far cheaper than redeveloping existing urban areas. Industrial land is heavily subsidised, so factories have remained in urban areas rather than move to cheaper sites on city outskirts. The amount of land classified as urban has more than doubled since 2000—40% of new urbanites became so when cities engulfed their villages.

Sprawl has resulted in populations becoming more thinly spread. China’s megacities are less dense than equivalents elsewhere in the world (see chart). Guangzhou could contain another 4m people if it was as packed as Seoul in South Korea; Shenzhen could be larger by 5m. Extending outward takes a toll: slow commutes from far-flung suburbs increase fuel consumption and cut productivity.

Massive spending on infrastructure has hugely improved connections within and between cities. Since 1992 China has spent 8.5% of its national income on infrastructure each year, far more than Europe and America (2.6%) or India (3.9%). Yet city residents still complain. Subways are often built as engineering projects, with stops at set distances, rather than where people want them to be, says Sean Chiao of Aecom, an infrastructure firm. Buses, metros and rail networks are poorly integrated because separate agencies manage them.

via Urbanisation: The great sprawl of China | The Economist.

26/01/2015

Narendra Modi’s Suit and Its Message to Obama – India Real Time – WSJ

Even the pinstripes on Indian Prime Minister Narendra Modi’s suit cannot escape scrutiny.

The yellow, almost-gold, stripes that appear against the navy blue wool fitted Indian jacket and pants he wore on Sunday were not simple stitching. They were Mr. Modi’s name embroidered into the fabric, said a person familiar with Mr. Modi’s wardrobe.

Over and over again the lines repeated the words: “Narendra Damodardas Modi.” His middle name is his father’s first name: Damodardas Mulchand, a tea seller.

Mr. Modi, wore the pinstriped suit to receive U.S. President Barack Obama at the Indian presidential palace on Sunday. Mr. Obama is on an official three-day visit to India.

He landed in the capital New Delhi on Sunday morning where he was greeted by Mr. Modi in a break with protocol. The pair also hugged.

Mr. Modi, who changed his outfit three times on Sunday, started with a cream colored shirt paired with a saffron shawl for the airport visit. He then changed into that pinstriped fitted Indian jacket with his name all over it for a luncheon he hosted in Mr. Obama’s honor at Hyderabad house. After lunch the pair walked in the garden and were photographed drinking tea together.

Later that evening, Mr. Modi donned a dove-grey fitted Indian jacket for a state banquet at Rashtrapati Bhavan, the president’s palace.

For the Republic Day parade on Monday Mr. Modi paired a black fitted jacket with an elaborate turban, a nod to his Gujarati heritage. The red, green and orange hand-tied turban, speckled with white dots, is a a tie-dye technique called Bandhani that is practiced mostly in the western Indian states of Rajasthan and Gujarat. Mr. Modi was the chief minister of Gujarat for more than a decade.

But the Obama visit’s wardrobe will probably be best-remembered for those stripes on Mr. Modi’s second outfit. They started a social media outrage especially on Twitter where some users described Mr. Modi as a narcissist for choosing to wear his name all over his jacket.

via Narendra Modi’s Suit and Its Message to Obama – India Real Time – WSJ.

26/01/2015

Rain on India’s parade, but Obama visit keeps spirits high | Reuters

U.S. President Barack Obama watched a dazzling parade of India’s military might and cultural diversity on Monday, the second day of a visit trumpeted as a chance to establish a robust strategic partnership between the world’s two largest democracies.

Photo

It rained on the parade through the heart of New Delhi, but excitement nevertheless ran high over Obama’s landmark visit, which began on Sunday with a clutch of deals and ‘bromance’ bonding with Prime Minister Narendra Modi.

The two leaders announced plans to unlock billions of dollars in nuclear trade and to deepen defence ties.

Most significant was an agreement on two issues that, despite a groundbreaking 2006 pact, had stopped U.S. companies from setting up nuclear reactors in India and had become one of the major irritants in bilateral relations.

“Mobama breaks N-deadlock,” the Mail Today newspaper said on its front page, which carried a photograph of Modi and Obama hugging each other warmly.

The bonhomie was a remarkable spectacle, given that a year ago Modi was persona non grata in Washington and was banned from visiting the United States for nearly a decade after deadly Hindu-Muslim riots in a state he governed.

Obama is the first U.S. president to attend India’s Republic Day parade, an annual show of military prowess that was long associated with the anti-Americanism of the Cold War.

via Rain on India’s parade, but Obama visit keeps spirits high | Reuters.

24/01/2015

China’s Risks in Shedding Debt-Fueled, Investment-Led Growth – Businessweek

Few Chinese leaders are as revered as Deng Xiaoping. His late-1970s modernization drive led to an unrivaled run of high-speed growth. Chinese President Xi Jinping, who has big reform ambitions of his own, often evokes the memory of the paramount leader, who died in 1997. In 2012, shortly before he assumed the top government job, Xi signaled his own liberalization agenda by retracing Deng’s famous tour in 1992 of southern Guangdong province to promote economic reform. Last August, in a speech marking the 110th anniversary of the revolutionary leader’s birth, Xi, like his predecessors, recycled Deng-era slogans such as “socialism with Chinese characteristics.”

Is China Coming Down to Earth?

Deng’s legacy as the architect of Chinese modernity rides on a record of 10 percent average annual growth from 1980 through 2012. Xi oversees an economy that’s decelerating and that grew 7.4 percent in 2014, the weakest performance since 1990, when it grew 3.8 percent. The International Monetary Fund predicts that Chinese expansion will steadily decline to 6.8 percent this year and 6.3 percent in 2016, when archrival India is expected to eclipse China at 6.5 percent. All of which raises a question unthinkable a few years ago: Is the China growth miracle winding down for good?

China’s transformation from an agrarian backwater to a $9.2 trillion economy with globally competitive companies, including Xiaomi, Huawei, Baosteel, and Alibaba, has been remarkable. And plenty of countries would be thrilled with 6 percent growth. Yet China is also home to income inequality on par with that of Nigeria and Mexico, a rapidly aging populace, and a world-class environmental crisis. Years of politically driven investment with diminishing returns have led to too much debt and industrial overcapacity, as well as ghost cities with unfinished hotels and absurd ambitions. (You can soon visit Tianjin’s replica of Manhattan, provided you like your replica cities free of actual humans.) Loose credit conditions contributed to an unsustainable six-month, 63 percent stock price increase, prompting regulatory authorities on Jan. 19 to order the nation’s three biggest brokerages to stop adding new margin-trading accounts. The Shanghai Composite index tumbled 7.7 percent on Jan. 19, the biggest one-day drop since the financial crisis in 2008.

The total debt of the world’s No. 2 economy is roughly $18 trillion, or about 200 percent of GDP

China’s investment spending binge is packing less of a punch than it used to, according to the World Bank. From 1991 to 2011, it took $3.60 of investment to generate $1 of GDP growth. At the end of 2012 it required $5.40. Meanwhile, the country’s total debt—government, corporate, and household—is now roughly $18 trillion, or about 200 percent of total gross domestic product. “We’ve got the biggest debt bubble that the world has ever seen, and credit is continuing to grow [about] twice as fast” as the Chinese economy, says credit analyst Charlene Chu, a partner with Autonomous Research Asia in Hong Kong. Chinese officialdom is keenly aware of the problem. The growth model that delivered productivity spurts in the late 1990s—powered by reforms of state-owned enterprises and new technology brought in by foreign investors after the country’s admission into the World Trade Organization in the early 2000s—has lost its edge. As early as 2007, China’s then-Premier Wen Jiabao described his economy to the National People’s Congress as “unstable, unbalanced, uncoordinated, and unsustainable.”

Michael Pettis, a finance professor at the Guanghua School of Management at Peking University, says the Chinese experience has much in common with Brazil in the 1960s, the Soviet Union in the 1970s, and Japan in the 1980s. All resorted to what economists call the financial repression of households to accelerate development. Family savings were channeled primarily into bank accounts with regulated and below-market deposit rates. Banks then recycled the capital into low-interest loans for businesses to build factories at home and to export abroad.

When it works, and it did stupendously for China, the economy hits the fast lane and incomes grow so fast that consumers don’t mind getting low returns on their savings—or being ruled by an unaccountable one-party state. Unfortunately, research by Pettis shows, “every investment-led growth miracle in the last 100 years has broken down.”

Xi and Premier Li Keqiang are trying to avoid that fate by guiding China onto a more sustainable path that would bolster the role of consumer spending (about 34 percent of GDP, vs. 68 percent in the U.S. in 2013, the World Bank reports) and shift the economy to a more services-oriented model. They say they’ve mapped out more than 300 reforms that over time will reduce state intervention in the economy and energy price controls that favor manufacturers; the changes will also improve the social safety net and encourage market-driven deposit rates to get Chinese families saving less and spending more.

via China’s Risks in Shedding Debt-Fueled, Investment-Led Growth – Businessweek.

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