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News from China
Bad-loan ratio not high enough to trigger systemic financial risk
8th November 2016

 CHINESE commercial banks’ bad-loan ratio is not so high that it would have the potential to trigger a systemic financial risk, said a senior official with the country’s banking sector’s watchdog.

There is no universal international standards or warning line for bad loan ratio and any projections should factor in the ability of banks to digest non-performing loans via provision funds set aside 
to cover bad loans, profits and capital for NPL level evaluation, Wang Zhaoxing, deputy head with the China Banking Regulatory Commission, wrote in the latest 
edition of China Finance, a magazine published by the central bank.
A high bad-loan ratio alone is not likely to cause systemic financial risk, which must take into account the overall economic conditions, 
corporate debt leverage and the liquidity, capital adequacy ratio and provision coverage ratio, Wang added.
The Chinese banking sector’s bad-loan ratio rose from 0.87 percent at the end of 2012 to 1.75 percent at the end of September, with a total 
balance of 1.4 trillion yuan (US$207 billion).
China has entered the new normal growth period tasked with deleveraging and destocking the economy and cutting overcapacity, which led to the 
rising bad-loan ratio. However, the Chinese banking sector has enough profit, provision funds and capital to ease the impact of bad loans,
Wang said.
Chinese banks are also exploring changes to their business models to improve profits, making them more able to manage risks, Wang added.
The latest quarterly financial reports of China’s five major banks, including the Industrial & Commercial Bank of China and the Bank of China, 
posted steady year-on-year net profit growth in the first three quarters. Income from wealth-management products and other non-traditional 
sources posted over 20 percent rises year on year and an average share of about one third of their total revenue.
China’s credit risk is under control as long as the economic slowdown is kept in check, and there are no violent capital and property market 
fluctuations or massive corporate bankruptcies, Wang said.
Source: Shanghai Daily, November 8, 2016
High-earners set to rise by 2030
7th November 2016

 CHINA’S pool of high-earning consumers is set to surge in the next 15 years, their household spending growing to be greater than the European Union's current level, a report showed.

The number of people earning above US$10,000 per year is expected to grow to around 480 million by 2030, from around 132 million today, according to research by the Economist Intelligence Unit, a think tank with the Economist.
The proportion of the population with upper-middle and high incomes will expand from 10 percent to 35 percent by 2030 when China will look and feel like a more middle-class society,
although inequalities in wealth will remain an important social challenge, the report pointed out.
“We expect that the purchasing power of individual Chinese consumers in 2030 will be roughly akin to that of South Korea today or the US in 2000,” said Wang Dan, EIU China analyst.
Some interior cities will become major centers of consumption, with Changsha, Chengdu, Chongqing and Wuhan each having over 2 million high-income consumers by 2030.
However, other smaller cities may be left behind as regional inequalities persist.
Source: Shanghai Daily, November 7, 2016
China phone makers look smart in sales league tables
3rd November 2016

 THE “smart talk” last weekend was over smartphones, after International Data Corp (IDC) reported that Oppo and Vivo had overtaken Huawei and Xiaomi to become the best-selling mobile phone brands in China in the third quarter.

Oppo and Vivo, both owned by Guangzhou-based BBK Electronics, ranked first and second respectively in the IDC domestic rankings, surprising both the media and the information technology industry.

It’s another sign of the emerging importance of domestic producers in the world’s biggest mobile phone market.

In the third quarter, China smartphone sales grew 5.8 percent from a year earlier to 108.1 million units. The top five vendors were Oppo, with a 17.5 percent market share, Vivo with a 16.7 percent share, Huawei, with 15.7 percent, Xiaomi with 8.7 percent and Apple with 7.1 percent, US-based research firm IDC reported.

Huawei sales rose 23 percent on the year, while Oppo surged 122 percent in the same period.

As a technology reporter, I am not as interested in numerical rankings as I am in the emerging muscle of domestic technology in a market so long dominated by foreign brands. It’s a sign that Chinese firms are coming into their own, becoming more aggressive and innovative.

Just look at Oppo’s rapid battery-charging technology and improved camera processor, ZTE’s naked-eye 3D photography and display, Huawei’s dual camera with Leica design, Xiaomi’s “coolest-looking” concept model and LeEco’s eye-catching debut of its US store.

Indeed, the IT scene this autumn is radically different from that of a year ago, when domestic handsets suffered from sameness in design and lack of innovation. Firms like Xiaomi and Huawei used to spend a lot of time focusing on features of Qualcomm’s processor and Sharp’s screen, which are used in various models.

A change in thinking has been ringing up booming sales.

“Oppo’s success is not something that was achieved overnight,” said Xiaohan Tay, a senior analyst at IDC. “It has key strengths, such as its VOOC fast charging technology and the elegant design of its phones. This, coupled with its aggressive marketing tactics, helped it succeed in the marketplace.”

The July figures announced by Oppo, a company not prone to talking about such figures, showed 7 million units of its R9 model sold, meaning a sale of an average 1.1 units each second.

In the upgraded R9s model released last month, Oppo has a camera senor co-developed with Sony, featuring faster focus and better performance in dark environments. It’s Oppo’s first venture into the up-steam camera segment. The preorder sales of the new R9s “doubled” that of R9, said Oppo without revealing more figures.

Diversified strength

Vivo, which offers professional and “lossless” music experiences on its smartphone, has announced a marketing linkup with the National Basketball Association to target sports-loving young consumers.

To some extent, both Oppo and Vivo have built up their strength in Tier 3-5 cities – smaller places not as deeply penetrated by big brands.

On a recent journey to Xining, capital of the far western province of Qinghai, I was surprised to find the two brands being aggressively marketed in off-line stores. In the downtown area, Oppo and Vivo had at least five times more retail outlets than any other brands.

The battery problems of Samsung, the world’s top smartphone brand, and the short supply of Apple iPhone 7 models are expected to open wider opportunities for Chinese-brand smartphones.

Samsung halted sales of its flagship Galaxy Note 7 model in China last month, following a global recall of 2.5 million Galaxy Note 7s over exploding batteries.

The brands expected to benefit from the Samsung crisis include Apple, with its newly released iPhone 7, and Chinese brands Huawei, Vivo and Oppo, Taiwan-based research firm TrendForce said.

As Android phone makers, Chinese brands may benefit more directly from Samsung’s recall.

Xiaomi released its Mi Note 2 and concept model Mi Mix last month.

Xiaomi Mi Note 2, with a similar look to Samsung’s Galaxy Note 7, was jokingly called “the unexploded Samsung Galaxy Note 7,” with its nice design and big screen. The more eye-catching Mi Mix, with a bezel-less design, is being hailed as “the coolest-looking phone of 2016” and has even been called “Xiaomi’s iPhone 8.” The accolades highlight the strength of Xiaomi’s innovation capacity for a company once best known only for strong online marketing and sales.

Talking about core-tech products, ZTE last week unveiled a smartphone that supports 3D photography and naked-eye 3D views. It debuted at a prices of 2,999 yuan (US$448). The new Axon 7 Max is also the first 3D-featured smartphone model made by a mainstream phone vendor.

ZTE expects 3D and virtual reality to become mainstream digital entertainment formats in 4G and coming 5G eras. It has cooperated with several content and game partners to offer consumers full-scale 3D experiences, covering 3D picture shooting and transformation from 2D to 3D formats. It features a dual-camera for 3D photography, over 60 3D games and more than 1,000 3D programs.

LeEco, the Chinese technology company, is setting out to become a household name with smartphones and flat-screen TVs that undercut the prices of Apple, Google, Samsung and other industry stalwarts. LeEco heralded its entrance into the US market last month with an online store and smartphone, TV and online video services.

It may sound “crazy” to try to compete against Apple, Amazon and Google on their home turf, said Jia Yueting, LeEco’s founder and chairman. However, he added, LeEco has its own unique ecosystem and advantages.

Huawei is expected to continue expanding into the higher-end of the market with its P9 and business-oriented Mate models. The latest versions are scheduled to be released later this month.

“It’s important for vendors to focus on investment in technology in order to have a key flagship product that stands out in the market, getting people to talk about its brand,” said IDC’s Tay.

Source: Shanghai Daily, November 3, 2016
Manufacturing grows fastest in over 2 years
2nd November 2016

 CHINA’S manufacturing activity grew at the fastest pace in more than two years in October, as the economy continued to stabilize and the supply-side reform achieved results, data showed yesterday.

The official Purchasing Managers’ Index, a comprehensive gauge of operational conditions in largely state-owned manufacturing companies, added 0.8 points from a month earlier to 51.2 last month, according to the National Bureau of Statistics and the China Federation of Logistics and Purchasing.

A reading above 50 means expansion in the manufacturing sector.

The October figure pointed to a third straight month of growth, and was the highest since July 2014.

Meanwhile, the Caixin China General Manufacturing PMI, a counterpart for smaller and private manufacturers, also rose to 51.2 in October, the fastest pace since March of 2011.

“China’s manufacturing PMI surprised the market on the upside,” said Li Wei, an economist at Commonwealth Bank of Australia. “We expect industrial production growth to accelerate to 6.4 percent in October, up from 6.1 percent a month earlier.”

Zhao Qinghe, analyst at the National Bureau of Statistics, said the improvement was due to renewed market demand and the results of supply-side reform, which pushed industrial companies to cut excessive capacity and move to more profitable sectors.

“The pace of capacity reduction in steel and coal industries has quickened in recent months, and it helped create a better industrial structure,” Zhao said.

The components of the official PMI showed that new orders rose to 52.8 in October from 50.9 in September, while production improved to 53.3 from 52.8.

China’s economy grew 6.7 percent from a year earlier in the third quarter, in line with the pace in the first two quarters and well within the government’s target of between 6.5 percent and 7 percent.

The official non-manufacturing Business Activity Index, which measures the services sector, rose 0.3 points from a month earlier to 54 in October, the highest since December, the statistics bureau said.

Source: Shanghai Daily, November 2, 2016

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