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News from China
China’s online trade soars 59%
4th August 2015

 DESPITE an anemic economy, China’s e-commerce trade soared last year thanks to an improved Internet infrastructure and an increase in cellphone users.

The transaction value of Chinese shopping websites rose 59 percent year on year to 16.4 trillion yuan (US$2.6 trillion), according to figures released yesterday by the National Bureau of Statistics.

Third-party platforms, like China’s largest shopping website Taobao.com, accounted for about 44 percent of the total, with self-operated stores taking the remainder, the bureau said.

The country’s 20 biggest online websites saw aggregate transactions totaling 6.2 trillion yuan, making up about 90 percent of all third-party platforms.

Chinese businesses have turned to the Internet to offload stocked goods in a bid to cut costs and increase profits against economic headwinds, while price-sensitive consumers appreciate online shopping for its convenience and a variety of choices.

Sun Qingguo, an official from the bureau, said the booming Internet, especially the pervasive mobile network, created an intimate bond between buyers and shopping websites and provided ample space for the development of e-commerce. China had the world’s largest 4G network and 361 million online shoppers at the end of last year.

Stellar growth in e-commerce also lifted online payment and logistics companies, Sun said.

China overtook the United States to top the world in terms of the business volume in express delivery in 2014.

Surging e-commerce will generate fresh consumption demand, prompt a new investment wave and encourage innovation, Sun said.

Source: Shanghai Daily, August 4, 2015
Small businesses thriving in the countryside
3rd August 2015

 STARTUPS are appearing all over China’s countryside as the government encourages rural entrepreneurship with a spate of favorable policies.

Last week, the Ministry of Human Resources and Social Security publicized employment figures of 500 villages it supervised in 10 provinces. According to the ministry, about 13,000 rural laborers started their own businesses in the first half of this year, up 3.1 percent year on year.

In provinces with large numbers of migrant laborers, the number was even higher, with the southwestern Guizhou Province having recorded some 72,000 laborers who became their own bosses in the first half, a year-on-year increase of 58 percent.

More rural workers chose to start their own businesses thanks to government policies supporting entrepreneurship, said Zhang Ying, deputy head of the ministry’s department of employment support.

Wang Qiongshi, the head of a laundry facility in his hometown of Haikou, capital of south China’s Hainan Province, was once a migrant worker struggling in neighboring Guangdong Province. Wang said he started his own business a few years ago, which now makes more than 200,000 yuan (US$32,200) a month.

Qin Guohong, who worked in Nanning of the Guangxi Zhuang Autonomous Region a few years ago, has launched a pig-selling business in his hometown of Baise, also in Guangxi.

“Registration is easier these days, and the government provides financial support,” said the young man, who has opened 15 chain stores in Baise.

The State Council, China’s Cabinet, announced new policies in June to encourage migrant workers, college graduates and discharged soldiers to return to their hometowns and start their own small businesses.

The government has promised easy business registration and will even allow them to participate in rural infrastructure development and public services that are normally reserved for the state.

While countless migrant workers are still struggling to make ends meet in China’s cities, many people are returning to their rural hometowns to start their own businesses.

In Guizhou’s capital Guiyang, a business incubation park was put into operation in the city’s suburbs in April by the provincial government.

The “Dream Factory” park provides free venues, cheap accommodation and startup loans from the provincial government. It has already attracted a dozen entrepreneurs.

Chickens and eggs

Li Shucai, head of a startup team selling agricultural products, was sitting in a cubicle browsing client information when Xinhua reporters visited the park last week. Li said his new company supplies chickens, eggs and other local products to more than 100 companies across the country.

“I have just set up the business, so our budget is tight,” Li said. “But because the factory gives us lots of favorable policies, I feel less pressure.”

Wu Jingxin, an employee with the factory, said that the facility will provide a platform for innovation and a “startup spirit” in the province.

The story is the same in Guangxi, where the government has recently promised to give up to 100,000 yuan for each entrepreneur who meets its criteria.

The preferential policies have created a flow of migrant workers back to their hometowns.

In the central province of Henan, an area with millions of outbound laborers, the proportion of local rural people working outside the province dropped from 43 percent in 2013 to 39 percent last year, whereas the percentage of those working in their home counties and cities rose to 38 percent from 30 percent.

By the end of last year, there were 270 million rural laborers in cities, but it is estimated that about 2 million have returned home. More are predicted to return home in the future, according to the human resources ministry.

“Government support has really had a huge role in the returning trend of migrant workers,” said Zhang Jianjun, an economist with the Party School of the Gansu Provincial Communist Party Committee. “Meanwhile, favorable policies have brought investment as well as projects to China’s rural west.”

Local authorities are also implementing policies to attract skilled workers to return home. In Suzhou, east China’s Jiangsu Province, there are now 26 business incubation parks for returning migrant workers, with 76 companies employing more than 9,000 people.

Besides the lure of government support, many migrant workers have grown fed up with their lives adrift.

“Life in big cities is not all it is cracked up to be: the air was bad, transportation was terrible, and it was hard to lead a good life,” said Ma Dawu, who is from northwest China’s Gansu Province.

Many people are motivated to return home by the connections they have.

“At home you have acquaintances, and acquaintances mean business,” said Gao Mingjun, a migrant worker who returned to Dingxi City in Gansu.

Wu Zhaohui, an official in Tongren in Guizhou, said government policies and e-commerce in rural China help to make returning home an attractive idea.

“When you work at home, you have your family members around, which offers a strong support system,” Wu said.

“This is what migrant workers usually don’t have in big cities.”

Despite all the advantages of rural entrepreneurship, the picture is not all rosy. Poor infrastructure and high costs are stumbling blocks.

Tu Wuye, who runs a metalwork company in Guangxi’s Lipu County, said it is difficult to deliver his products because of the bad roads.

“There are no expressways in Lipu, which hampers the development of our company,” Tu said.

Many people also complained of the trouble of hiring talent.

“As a startup, our business is a bit risky in the beginning and our benefits are quite limited,” said a migrant worker who has started an agricultural product processing company in Guangxi.

“So it’s important to think about how to lower the cost and improve benefits.”

Dang Guoying, a rural economy expert with the Chinese Academy of Social Sciences, said it is important to improve the rural environment for entrepreneurship in the countryside by enhancing infrastructure.

“The government should also provide more guidance on the market and on business management. Only in this way can we truly cultivate sustainable businesses in rural China,” he said.

Source: Shanghai Daily, August 3, 2015
China seeks private rail investors
31st July 2015

 CHINA yesterday issued a guideline to attract more private investment into its cash-strapped railway sector as it presses ahead with costly high-speed rail projects.

Under the guideline, from the National Development and Reform Commission, private investors will be encouraged to bid for railway contracts and manage projects through diversified investment channels.

The government wants to see more private investment in the construction and operation of inter-city and intra-city lines as well as rail links for mining projects. It will also seek private investment in overseas railway contracts as well as domestic freight railroads and passenger rail services.

In the first half of this year, China Railway Corp, which is responsible for building and operating the railway network, completed only 265.1 billion yuan (US$42.7 billion) of fixed-asset investment, a third of its full-year planned investment.

Source: Shanghai Daily, July 31, 2015
Carmakers counting cost of China slowdown
30th July 2015

 General Motors Co’s US$5 billion initiative to create cars for China and other emerging markets comes just as carmakers face a collapse in the booming Chinese demand they were counting on to power their growth.

June sales in the world’s biggest car market by vehicles sold fell 3.4 percent from a year earlier as an economic slowdown deepened and smog-choked cities tried to curb growth in car ownership. Sales growth has cooled from 2009’s explosive peak of 45 percent, but the latest figures surprised analysts, who were forecasting a healthy 7-8 percent for this year.

Volkswagen AG yesterday said its second-quarter profit fell 16 percent due partly to weakness in China, where first-half sales dropped 0.5 percent.

Those still buying cars are benefiting: GM and VW, China’s top-selling brands, have cut prices by up to 53,900 yuan (US$8,700). Analysts said dealers are struggling financially and carmakers might have to share more profit with them.

“The days when you could sell whatever car you made are not there anymore,” said Lin Huaibin of IHS Automotive.

The shift is significant because of China’s role in the global ambitions of United States, European and Asian carmakers. Despite the slowdown, they are pushing ahead with multibillion-dollar plans to expand production and create models to suit Chinese tastes, adding to competition in a crowded market.

On Tuesday, GM said it will work with Chinese partner Shanghai Automotive Industries Corp to develop vehicles to be sold in China, Brazil, India and Mexico. GM said it aims for annual sales of 2 million vehicles beginning in 2019.

In April, Ford Motor Co and a local partner said they would spend US$1.1 billion on a factory in China’s northeast. Ford said it would add 200,000 vehicles to its annual China production capacity.

China overtook the US in 2009 as the biggest market by number of vehicles sold as incomes rose and Beijing promoted the industry as an engine of economic development.

Double-digit Chinese sales growth helped to buoy global carmakers after the 2008 financial crisis crushed demand everywhere else.

Carmakers added bigger backseats and other features for Chinese buyers, changing the look and feel of cars sold worldwide. Nissan Motor Co made China a pillar of its global turnaround strategy.

Companies were preparing for slower growth, but the squeeze hit faster than many expected.

“The impact to earnings in 2015 could be substantial,” said Bernstein Research in a report.

“We still expect China to sell a lot more cars in future years, but returns in the market may never be the same again.”

First-half sales rose 4.8 percent, down from 11.2 percent in the same period of 2014, according to the China Association of Automobile Manufacturers.

Even that might overstate demand. Analysts said carmakers have shifted to reporting shipments to dealers instead of retail sales, possibly to obscure how few cars are being purchased.

Last week, South Korea’s Hyundai Motor Co said China sales fell 14 percent from a year earlier in the three months ending in June.

As early as March, BMW AG warned the China outlook was darkening. Europe’s biggest luxury carmaker said its Rolls Royce unit had sold only 14 cars to Chinese buyers in February.

The downturn is so severe that Barclays slashed its forecast for this year’s sales growth to just 1.7 percent from 8.5 percent. Next year’s forecast was cut to 5.2 percent from 8.5 percent.

Chinese sales still are huge. GM said a record 1.7 million GM-brand vehicles were sold in the first half of the year, but growth was just 4.4 percent — less than half the 10.7 percent rise for the first half of last year.

Source: Shanghai Daily, July 30, 2015

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