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News from China
Cash tills ring as China’s rich shop at home
5th December 2016


CHINA’S wealthiest shoppers are spending at home again, roused from a weaker yuan, lower prices and a crackdown on overseas sales agents — a welcome boost for the world’s luxury brands.
China’s rich make up almost a third of the world’s luxury shoppers, up from only 2 percent around the turn of the millennium. They are a driving force for global luxury, even after a slight dip this year when fewer traveled abroad, in part due to militant attacks in Europe.
For the past three years, a crackdown on corruption and ostentation by President Xi Jinping dampened sales: big names such as LVMH, owner of Louis Vuitton, shuttered stores, particularly in second- and third-tier cities.
In 2016, however, fashion houses, jewelers and buyers say that is changing, as China tries to shift away from an economy driven by heavy investment in infrastructure and encourages consumers to shop.
Burberry, Gucci-owner Kering, and Tiffany have all reported an uptick in their most recent China earnings, striking a note of optimism as the industry enters its critical weeks between the Christmas rush and Chinese New Year.
“Everyone is benefiting from more traffic at the Chinese (luxury) shops,” said Bruno Lannes, a Shanghai-based partner with consultancy Bain. It estimates a four-percent increase in Chinese mainland sales after three years of decline.
“Some brands in China are expecting 2016 to go back to their peak in 2012, though the mix is different. I expect some brands will beat that record,” Lannes said.
On the streets of Shanghai and Beijing, shoppers say they are, indeed, splashing out more often at home.
The depreciating yuan means the currency doesn’t purchase as much abroad, while luxury brands such as Chanel have moved since last year to narrow once huge differences between prices in China and overseas.
At the same time, the government has cracked down on daigous, shoppers-for-hire who trade off that price imbalance and buy goods more cheaply overseas for Chinese mainlanders.
“Some brands price their products in China closer to the overseas markets, such as Chanel,” said Emma Yu, a 32-year-old housewife exiting a Cartier store while shopping for a handbag in Shanghai’s financial district. “If there’s only a few thousand yuan difference, I would just buy it at home.”
Another shopper outside a Louis Vuitton store in Shanghai, an accountant at a multinational who gave her surname as Lu, said she was also buying more at home, especially if not traveling.
“I definitely bought more luxury items at home than in the past since last year — a lot more — because it’s convenient to buy things here,” she said, standing with a friend as she compared a US$5,700 purse she had bought with one in the shop window.
China’s mainland has been seeing positive sales for a while, Johann Rupert, chairman of Compagnie Financiere Richemont, told investors last month.
“It seems that the Chinese government’s intent to promote growth through consumption rather than just investment is bearing fruit,” Rupert said.
Source: Shanghai Daily, December 5, 2016
OPEC cuts to have modest impact
2nd December 2016

 OPEC’S decision to cut production gave an immediate boost to oil prices, but the impact on consumers and the US economy is likely to be more modest and gradual.

The cartel agreed on Wednesday to cut output by 1.2 million barrels a day, reversing a strategy that produced lower oil prices and pain for US drillers but saved money for consumers.
Even if the Organization of the Petroleum Exporting Countries members carry through on their promises, global oil production would only fall by about 1 percent. There is still more supply than demand — the reason oil prices collapsed beginning in mid-2014.
The price of oil shot up 9 percent to near US$50 a barrel. If the price keeps rising, some of the slack from OPEC cuts will be picked up by producers in the US — good news for drillers and oilfield workers in Texas and North Dakota. President-elect Donald Trump has vowed to increase drilling in the US, the world’s third-largest producer after Saudi Arabia and Russia, which would help ensure there is plenty of oil.
In short, analysts say, consumers and businesses are not likely to see the return of US$100-a-barrel oil — and the high energy costs that came with it — anytime soon.
Still, there could be some short-term shocks even before OPEC’s cuts take effect in January.
“The average Joe filling up his tank may notice in the next week or two that gas prices move higher by 5-15 cents a gallon just on the psyche of the deal,” said Patrick DeHaan, an analyst for GasBuddy, a site used to comparison-shop for gasoline.
The US Energy Department predicts that heating oil costs will rise about a third this winter, but that prediction was issued more than a month ago and was based heavily on forecasts of much colder temperatures in the Northeast. If the weather forecast proves wrong, prices could sink because heating-oil inventories are running above their five-year average and grew again last week.
A small increase in gasoline or even a bigger jump in heating oil, which is used in only 5 percent of American homes, won’t affect shoppers if the economy does well, in the view of Michael Niemira, chief economist at The Retail Economist LLC, which does a weekly retail sales report with Goldman Sachs.
“The consumer isn’t really focused on gasoline since prices remain low. A better economy, a better labor market — those matter much more,” Niemira said. But if gasoline spikes to US$4, “that could be bad.”
Crude has traded between US$40 and US$50 a barrel the last several months. The national average for gasoline on Wednesday stood at US$2.15 a gallon in the US, according to the AAA auto club.
Before the OPEC meeting, the US Energy Department predicted that crude would rise to US$50 or US$51 a barrel next year.
Sal Guatieri, senior economist at BMO Capital Markets, said modestly higher oil prices will actually help the US economy by spurring investment in the energy industry without draining consumers’ purchasing power. He expects an average price of about US$53 a barrel next year as a result of the OPEC production cuts.
“The losers are Europe and Japan — oil-importing regions of the world,” Guatieri said.
Source: Shanghai Daily, December 2, 2016
Rural areas urged to start businesses and innovate
30th November 2016

 THE central government yesterday released guidelines to encourage rural residents to explore entrepreneurship and innovation.

According to a State Council document, the government will offer policies to encourage migrant workers, college graduates, retired servicemen, scientists and technicians to start up businesses in the countryside to aid rural economic development.
The government expects them to work together and inject new energy into the rural economy by introducing modern technology, systems and management concepts to the countryside, which would make China’s agricultural sector more competitive and lift farmers’ income.
New agrobusinesses including large-scale farming, farm produce processing, leisure agriculture, rural tourism, producer and consumer services are priorities of the policy support, it said. The government will also encourage new types of business entities like family farms and farming cooperatives and online businesses.
The measures include easing market access, improving rural financial services, raising fiscal support, providing entrepreneurship and innovation training, and enhancing social safety net, it said.
Source: Shanghai Daily, November 30, 2016
October services trade deficit at US$20.9b
29th November 2016

 CHINA’S foreign service trade deficit narrowed in October while the trade volume dropped, data from the State Administration of Foreign Exchange showed yesterday.

The deficit stood at US$20.9 billion last month, down from US$23.3 billion in September and US$25.4 billion in August.
Income from trade in services stood at US$22.3 billion last month, down from US$23 billion in September. Meanwhile, expenditures totaled US$43.2 billion, less than September’s US$46.3 billion.
Distinct from merchandise trade, trade in services refers to the sale and delivery of intangible products such as transportation, tourism, telecommunications, construction, advertising, computing and accounting.
China’s service trade volume grew from US$362.4 billion in 2010 to US$713 billion in 2015, doubling the average international growth speed in the sector. The country is aiming to increase its service trade volume to more than US$1 trillion by 2020.
The State Council has pledged measures to improve the development of service trade, including gradually opening up the finance, education, culture and medical sectors. SAFE began releasing monthly data on service trade in January 2014 to improve the transparency of balance of payments statistics.
Source: Shanghai Daily, November 29. 2016

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