Posts tagged ‘economy’

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03/05/2013

* Credit-Card Companies Battle in China

BusinessWeek: “The Ms. Magic credit card from China Citic Bank (601998) is dotted with Swarovski crystals and offers free beauty treatments and health insurance. Huaxia Bank’s (600015) Pretty Lady card, co-issued with Deutsche Bank (DB), entices women with triple points for cosmetic purchases and fitness club memberships. Citigroup (C), which last year became the first U.S. bank allowed to issue its own solo logo cards in China, offers to waive its first-year annual fee of 300 yuan ($49) for Rewards cardholders applying before March or spending more than 20,000 yuan by the end of December.

Credit-Card Companies Battle in China

They’re all part of a battle for affluent consumers in the world’s fastest-growing market for plastic, even as delinquencies have tripled in the past five years and profits remain elusive. “Credit cards are the ultimate growth area and also the battlefield for banks in China,” says Rainy Yuan, an analyst in Shanghai for Taipei-based Masterlink Securities. “Some may never earn a profit out of it, but they have to join the fight, as that’s the most efficient way of grabbing deposits and cross-selling other financial services.”

With interest rates fixed by the government at 18 percent annually, China’s banks can’t compete by lowering rates, so they differentiate themselves by offering merchant discounts and gifts, including Coach (COH) wallets, Hugo Boss (BOSS) quilts, and free Starbucks (SBUX) upgrades to a larger coffee. Chen Junjun, a marketing manager at China Guangfa Bank, spends 10 hours a day, seven days a week trying to lure customers to his roofless booth outside a subway station in Shanghai’s Pudong district. Among the gifts he offers: a wireless mouse, storage boxes, and coffee mugs. “No annual fees, buy-one-get-one-free for Starbucks coffee, and you get a free Coach wallet, too,” Chen says to a female passerby. “If you have a job, you are qualified. If you have a credit card, you are qualified.””

via Credit-Card Companies Battle in China – Businessweek.

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03/05/2013

* China Factories Try Karaoke, Speed Dating to Keep Workers

WSJ: Third in a Series: China’s Changing Work Force

“After years of offering production bonuses and other financial incentives to boost employee loyalty, TAL Group this year tried an unconventional tactic at its factory here in southeastern China: holding a “Sewing Olympics.”

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The manufacturer for such companies as Burberry Group BRBY.LN +1.21% PLC and Brooks Brothers Group Inc. had workers race to cut, stitch and fold raw fabric into high-end dress shirts. The 10 winners received small cash prizes and had their life-size images hung at an outdoor location where thousands of workers pass on the way to meals.

Cheng Pei Quan is a winner of the ‘Sewing Olympics’ at a factory. Manufacturers are looking beyond bonuses to retain workers and boost production in China.

First in the Series: China Manufacturers Survive by Moving to Asian Neighbors

Second in the Series: A Billion Strong but Short on Workers

“Chinese people put quite a lot of value on ‘face,’ ” says 23 year-old winner Cheng Pei Quan, who earned the nickname “The King of Collars” because he can sew 95 collars an hour, a third more than average. “This competition gives me a sense of pride that other benefits such as rising wages cannot give me.”

After boosting pay to compete with other manufacturers, factory owners are finding money alone no longer is enough to attract and retain a generation of workers that demand a greater work-life balance than their parents did.

Companies are holding “American Idol”-esque singing contests, sponsoring dating events, constructing libraries and karaoke rooms on campus, and organizing small dinners between managers and top workers.

Businesses also are sending postcards to workers who visit their families during the Lunar New Year—when manufacturers can lose 20% or more of their staff—urging the employees to return to work.

The measures are a response to an unprecedented shortage in China’s workforce. Demand for workers exceeded supply by a record in the first quarter. China’s working-age population, defined as people from ages 15 to 59, fell last year for the first time in decades, a result of the national one-child policy that was implemented in 1980.

While the number of migrant workers in China rose 3.9% last year, manufacturers face stiff competition from construction, mining and other industries for staff. The average monthly wage for such workers has increased 74% in the past four years, to $395 in the first quarter.

For factory owners, the ability to recruit workers is a matter of survival. If plants can’t find or replace staff quickly enough, they won’t be able to fill customer orders on time. Those that can’t will be forced to turn elsewhere in Asia to manufacture goods—or go out of business.

via China Factories Try Karaoke, Speed Dating to Keep Workers – WSJ.com.

Posted in Affluence, China alert, Economics, employment, Labour, labour reform, labour shortage, Low income, Manufacturing, Migrant workers, wage rises | Leave a Comment »

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01/05/2013

* China Manufacturers Survive by Moving to Asian Neighbors

WSJ: First in a Series: China’s Changing Work Force

“In a corner of a sprawling factory in this coastal southern city, sewing machines that stitched blouses and shirts for Lever Style Inc.’s clients now gather dust. As the din on the factory floor has dropped, so, too, has the payroll. Over the past two years, Lever Style’s employee count in China has declined by one-third to 5,000 workers.

The company in April began moving apparel production for Japanese retail chain Uniqlo to Vietnam, where wages can be half those in China. Lever Style also is testing a shift to India for U.S. department-store chain Nordstrom Inc. JWN -0.34% and moving production for other customers.

It’s a matter of survival. After a decade of nearly 20% annual wage increases in China, Lever Style says it can no longer make money here.

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A board shows workers’ statuses at each production line at Lever Style’s factory in Shenzhen, China.

“Operating in Southern China is a break-even proposition at best,” says Stanley Szeto, a former investment banker who took over the family business from his father in 2000.

Companies from leather-goods chain Coach Inc. COH -0.53% to clogs maker Crocs Inc. CROX -0.94% also are shifting some manufacturing to other countries as the onetime factory to the world becomes less competitive because of sharply rising wages and a persistent labor shortage. The moves allow the companies to keep consumer prices in check, although competition for labor in places such as Vietnam and Cambodia is pushing up wages in those countries as well.

At Crocs, 65% of its colorful shoes are expected to be made in China this year through third-party manufacturers, down from 80% last year. Coach will reduce its overall production in China to about 50% by 2015 from more than 80% in 2011 so the handbag maker isn’t too reliant on one country, a spokeswoman says.

Some migration of apparel manufacturing from China is expected, and even encouraged by the government, as the country’s economy matures. As other Asian nations become efficient at mass manufacturing, China must embrace research and high-technology production to transform its economy as South Korea and Japan once did. But healthy economic growth requires that China expand its service sector and create higher-skilled manufacturing jobs at a rapid clip to compensate.

“If costs continue to rise, but China is unable to become more innovative or develop home-grown technologies, then the jobs that move offshore won’t be replaced by anything,” says Andrew Polk, a Beijing-based economist for the Conference Board, a research group for big American and European companies.

China continues to be the developing world’s largest recipient of foreign direct investment, attracting $112 billion last year. But that was down 3.7% from a year earlier. And exports still are rising in the double-digit percentages. Growth is slowing.”

via China Manufacturers Survive by Moving to Asian Neighbors – WSJ.com.

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01/05/2013

* China Grapples With Labor Shortage as Workers Shun Factories

The government’s plan to shift the economy from manufacturing and export to services and internal consumption may be a step in the right direction to re-balance the economy – see https://chindia-alert.org/2013/04/19/chinas-growth-the-making-of-an-economic-superpower-dr-linda-yueh/.  But only if the move doesn’t “hollow out” manufacturing and export as a result. Otherwise, China will be treading a path Western nations have trod and are still treading to one of slow growth and increasing debt.

WSJ:

Second in a Series: China’s Changing Work Force

“For 15 years, Cui Haifeng worked in China’s manufacturing industry, stitching together leather to make soccer balls before working her way up to warehouse manager at a wood-flooring factory.

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A young woman stands in the street as a hostess and advertisement for a hotpot restaurant in the shopping district Dongman in Shenzhen.

Last month the coal miner’s daughter traded a past of factory uniforms for a blouse and skirt, training as a customer-service representative for a life insurer in Guangzhou, southern China’s largest city.

The insurance industry “provides a more promising future and flexible working hours,” says Ms. Cui, 34 years old, who grew up in central China’s poor Henan province. “I want to earn more money to give my two kids a better and stable living environment.”

Her experience mirrors a transition sweeping China. This year, service-related positions—such as those in retail, travel and leisure—for the first time will account for more of the country’s gross domestic product than industrial-sector jobs, J.P. Morgan Chase JPM -1.90% predicts. Government figures show that the service sector created 37 million new jobs in the past five years, compared with 29 million in the industrial sector, which includes manufacturing, construction and mining.

Growing competition between the service and industrial sector for migrant workers like Ms. Cui is contributing to China’s tightest labor market in years, putting upward pressure on wages that already are rising in the double digits annually. That is leading apparel manufacturers to shift some production out of China, although concerns about worker safety in countries such as Bangladesh are forcing factory owners to consider the risks of doing so.

Demand for urban workers in China exceeded supply by a record amount in the first quarter, according to the government. Meanwhile, the average monthly income for migrant workers rose 12.1% from a year earlier.

“There is no let up in the labor shortage,” says Kelvin Lau, a senior economist Standard Chartered Bank. Manufacturers “are realizing that this is not a cyclical thing. It’s not about riding out a storm.”

In southern China’s industry-heavy Pearl River Delta region, nearly 90% of factory owners surveyed by Standard Chartered say the labor shortage will remain the same or get more severe this year.

Stronger growth for service-sector jobs signals that the government’s long-promised transition from an industrial economy focused on exports to one led by domestic demand is under way. Creating jobs in hair salons and insurance companies, instead of in steel mills and soccer-ball factories, helps fuel growth in the world’s second-largest economy.”

via China Grapples With Labor Shortage as Workers Shun Factories – WSJ.com.

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27/04/2013

* China Haidian may buy more watchmakers after Corum

Corum

Corum (Photo credit: Wikipedia)

Reuters: “China Haidian Holdings (0256.HK) may not stop at this week’s acquisition of Swiss watchmaker Corum as it seeks a foothold in high-end timepieces popular with Chinese consumers.

Chinese appetite for Swiss luxury watches has exploded in recent years, boosting sales at industry leaders Swatch Group (UHR.VX) and Richemont (CFR.VX).

But growth, particularly in top-end watches, has ground to a halt as the Chinese economy loses steam and a crackdown on giving expensive gifts as favours hurts demand.

China Haidian, which bought Swiss watch brand Eterna in 2011, said on Wednesday it was acquiring Corum Watches for 86 million Swiss francs ($90.8 million) to develop its Swiss brand portfolio and attract more Chinese customers.

“We may consider additional acquisitions in the future to grow our business if an opportunity arises,” Hon Kwok Lung, chairman of China Haidian, said on Friday in written answers to questions from Reuters.

He said no purchases were planned for now.

Hon said China Haidian wanted to use its retail network in China to help distribute and market Corum watches in China, as it did with Eterna.

Eterna has said its revenue grew in 2012, but product and market development costs brought it a net loss of HK$69.28 million. It expects Eterna to break even in a couple of years.”

via China Haidian may buy more watchmakers after Corum | Reuters.

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21/04/2013

* Thirty-three percent of world’s poorest live in India

Reuters: “India has 33 percent of the world’s poorest 1.2 billion people, even though the country’s poverty rate is half as high as it was three decades ago, according to a new World Bank report.

India reduced the number of its poor from 429 million in 1981 to 400 million in 2010, and the extreme poverty rate dropped from 60 percent of the population to 33 percent during the same period. Despite the good news, India accounts for a higher proportion of the world’s poor than it used to. In 1981, it was home to 22 percent of the world’s poorest people.

The World Bank report comes just days after it proposed a $12 billion to $20 billion plan to reduce poverty levels over four years in the Indian states of Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Odisha, Rajasthan and Uttar Pradesh. Sixty percent of the financing would go to state government-backed projects, according to the Hindu Business Line newspaper.

The study that came out today showed a similar decline in the number of people living in poverty in recent years. People living below $1.25 (67 rupees) a day fell considerably from more than half the people in the developing world in 1981 to 21 percent in 2010, despite a 59 percent increase in world population during the same period.”

via India Insight.

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19/04/2013

* China’s 2020 consumer is in a town you’ve never heard of

Reuters: “Wearing a floral brocade cardigan and toting a Huawei smartphone, Guo Qian, 22, gushes over her latest purchases on Taobao, China’s largest e-commerce platform. As an administrative worker, Guo makes only 3,000 yuan a month and spends most of it.

Customers selects hats at a street stall at the business area of Jiaozuo, China's central Henan province, December 20, 2012. REUTERS-Aly Song

Not only does she spend nearly all of her own money, Guo also fritters away most of her father’s 1,000 yuan monthly pension on trinkets and clothes on Taobao. “Sometimes I feel guilty using his money, so I buy him some clothes.”

Guo, a Zhengzhou native, already owns an apartment – her parents helped finance the purchase last year – and is on the upward climb to join China’s burgeoning middle class.

As Beijing tries to engineer a crucial macroeconomic shift– toward more consumption and less investment, the crucial “rebalancing” China’s new leadership is committed to, and the rest of the world is counting on — it is young consumers like Guo Qian who may hold the key to the transition.

Raised in an era of unprecedented prosperity, Guo, like many other members of what is known as the `post-80s’ generation (anyone born after 1980) has a very different answer than her parents when it comes to a central economic question: whether to spend the money she has, or save it?

“I don’t save at all,” she told Reuters. ” Why should I?”

Her “spend it if you’ve got it” attitude, some economists argue, may help unlock the surge in consumption that China urgently needs to rebalance its economy over the next decade, ending an era of lopsided, investment driven growth.

“This 18-35 group, for a variety of reasons, are much more optimistic and more open to risk, because they haven’t yet experienced bad times at all,” says Benjamin Cavender associate principal analyst with China Market Research. “They tend to have high disposable income relative to their earning power, and they tend not to be saving heavily.”

This generational change in mindset, harnessed to the sheer number of people growing more prosperous in once poor provinces throughout the country – such as Guo’s native Henan – is recasting China’s economic landscape: both the composition of growth, and its geography, are about to change significantly.”

via Insight: China’s 2020 consumer is in a town you’ve never heard of | Reuters.

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11/04/2013

* British shops ration baby milk as Chinese demand surges

Reuters: “British shops are rationing sales of baby milk after Chinese visitors and bulk buyers cleared their shelves to send it to China, where many parents fear the local versions are dangerous.

Shoppers browse the aisles in the Canary Wharf store of Waitrose in London January 23, 2013. REUTERS/Neil Hall

The British Retail Consortium (BRC), whose members account for 80 percent of the sector, said many stores had imposed a two-box limit on each customer to deter the “unofficial exports” to China.

Demand for foreign milk powder has been high in China since at least six infants died and 300,000 fell ill in 2008 after they drank milk laced with the industrial chemical melamine.

The scandal sapped consumer confidence in Chinese-made food and led to shortages of powdered milk in Hong Kong and Australia as people bought boxes to export to China.

The rise of the middle-class Chinese working mother has greatly increased sales of baby milk in the world’s most populous country. Fast-growing markets like China support a global baby food market worth an estimated $30 billion a year.”

via British shops ration baby milk as Chinese demand surges | Reuters.

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10/04/2013

* Fitch Lowers Rating on China Local-Currency Debt

WSJ: “Fitch Ratings Inc. lowered one of its key ratings on China’s government debt, in one of the most prominent warnings to date over a credit buildup in the world’s second-largest economy.

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The downgrade applies only to China’s yuan-denominated debt, which is primarily traded domestically—not the foreign-currency debt that it issues in international financial markets, so it is unlikely to have a big impact on global financial markets.

Nevertheless, it is the first outright downgrade in years of debt that is widely seen as buffered by China’s vast foreign-exchange reserves, highlighting a growing perception that massive lending by China’s banks, as well as shadowy nonbank lenders that operate under little regulation, could seriously disrupt China’s economic recovery.

Much of China’s debt came from a surge of lending in the wake of the 2008 global financial crisis, which helped Chinese growth rebound in part with the help of massive infrastructure projects but weighed down local governments and banks with loans. Analysts at Fitch have been part of a chorus of analysts and market players consistently sounding alarms about the run-up in China’s debt.

Saying that “risks over China’s financial stability have grown,” the credit-ratings firm lowered China’s long-term local-currency rating to single-A-plus from double-A-minus, with a stable outlook. It was its first downgrade of Chinese debt since at least 1997. It kept China’s foreign-currency debt rating unchanged at single-A-plus, saying it is well supported by China’s foreign-exchange reserves, worth $3.387 trillion at the end of 2012.

Bank credit extended to the private sector was equivalent to 135.7% of China’s gross domestic product at the end of 2012, the highest level of any emerging-market economy rated by Fitch, it said.”

via Fitch Lowers Rating on China Local-Currency Debt – WSJ.com.

Posted in Banking, China alert, Economics, loans | 1 Comment »

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05/04/2013

* Chinese overtake Germans as biggest spending tourists

China Daily: “Chinese tourists have overtaken Germans as the world’s biggest-spending travellers after a decade of robust growth in the number of Chinese holidaying abroad, the United Nations World Tourism Organisation (UNWTO) said on Thursday.

Chinese tourists, known for travelling in organised tours and snapping up luxury fashion abroad, spent $102 billion on foreign trips last year, outstripping deep-pocketed travellers from Germany and the United States.

Chinese tourists spent 41 percent more on foreign travel in 2012 than the year before, beating the close to $84 billion both German and U.S. travellers parted with last year.

Tourists from other fast-growing economies with swelling middle classes, like Russia and Brazil, also increased spending in 2012. In recession-hit Europe, however, French and Italian tourists reined in their holiday budgets.

“The impressive growth of tourism expenditure from China and Russia reflects the entry into the tourism market of a growing middle class from these countries,” said UNWTO Secretary-General Taleb Rifai.”

via Chinese overtake Germans as biggest spending tourists |Economy |chinadaily.com.cn.

Posted in China alert, Economics, Tourism | Leave a Comment »

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