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Business Tianjin Magazine - Business English Magazine in China
China H2 Foreign Trade Growth Forecast to Slow
Monday, 19 July 2010 11:38
The State Information Center predicted in a report that the growth of China's imports and exports will slow down in the third and fourth quarter of this year, China Securities Journal said Monday.
The report said that the growth rate of imports will gradually decrease to about 19.3 percent in the second half and hit a low for the year in the fourth quarter due to high base figures of the last quarter of 2009. It forecast a 33.6 percent whole-year growth over last year.
Exports will grow at about 16.3 percent in the second half, due to high base figures, the European debt crisis and adjustment to the country's export tax rebate policy, the report said, adding that the growth rate for this year will be around 24.5 percent year-on-year.
The report said that the country's imports and exports have recovered to their levels before the world financial crisis. With a shrinking trade surplus, China's foreign trade is more balanced. The country is increasing its exports to other emerging markets and reducing its reliance on major trade partners such as the United States, according to the report.
CHINA NPC: Regulator Mulls Letting Firms Sell Existing Shares In IPOs
Monday, 08 March 2010 12:04
BEIJING (Dow Jones)--China's securities regulator is considering allowing a company's existing shareholders to sell their holdings when the firm carries out an initial public offering, to lower the tendency of companies to raise more funds than necessary when they list, an official at the regulator said Sunday.
At present, a company seeking a listing is only allowed to sell new shares in its IPO, while its pre-listing shareholders are subject to lockup periods on their holdings after the company floats.
The China Securities Regulatory Commission plans to revise this rule as part of its reform of share-issuance regulations, CSRC Assistant Chairman Zhu Congjiu said.
"Currently, there's a tendency for Chinese companies to raise more funds than necessary" in an IPO, because limited share supply would drive up the IPO price, Zhu said during a news conference on the sidelines of the National People's Congress. "If the original shareholders can sell their holdings during an IPO, this problem can be alleviated."
He didn't say when the CSRC might make the rule change.
Zhu also said the regulator would make amendments to the rules governing the IPO approval process and the price-setting process for IPO shares. He didn't elaborate.
He said as China's A-share market is becoming more freely tradable, merger-and-acquisition activities will increase.
"A freely tradable market gives state-owned companies the opportunity to improve their business structure by making it possible for them to buy large chunks of other companies in the secondary share market," Zhu said.
He said that following rule changes six months ago, the market now has the final say on the pricing of IPO shares.
"We, as a regulator, are no longer giving window guidance on how a new share should be priced. The process is now left to the listing candidate, its underwriter and investors to decide," Zhu said.
China Surpasses India for Outsourcing
Thursday, 15 July 2010 15:10
BEIJING - China has replaced India as the primary destination of outsourcing and shared services for Asia-Pacific companies, accounting firm KPMG revealed on Wednesday.
The KPMG survey, which covered 280 senior company executives across Asia, showed that China's outsourcing and shared services are rapidly expanding and winning market share over India and other regional destinations.
"Though at the moment the country has still not reached the level of maturity seen in India, the growth of China's outsourcing market is significant. Many Western companies may still see India as their location of choice, but for executives within Asia Pacific the message is clear - China is now leading the way," said Edge Zarrella, global head, IT Advisory, KPMG China.
According to the survey, 42 percent of the respondents said their companies have set up one of their shared services centers in China. With regard to outsourcing, 41 percent said they have a third-party outsourcing provider in China.
Singapore stands second as a popular location for shared services at 29 percent, followed by India at 25 percent.
Figures from KPMG show that in 2007, China's onshore and offshore outsourcing market stood at only $7.5 billion. That amount nearly tripled to $20 billion last year, according to the Ministry of Commerce. By 2014, KPMG predicts that China's total outsourcing market will stand at $43.9 billion.
Moreover, shared services are also expanding rapidly in China. The survey finds that over 80 percent of senior executives employ an outsourcing strategy, shared services, or a combination of the two.
Senior executives across the Asia-Pacific also view China as the preferred destination for setting up shared services centers.
The survey also revealed low labor costs as one of the reasons for contracting outsourcing providers (51 percent of respondents choose low labor costs as the top factor), although it is clear that this is far from the sole determining factor.
In addition, when asked about key factors used in determining the location of their shared services center, respondents once again cited low labor costs, as well as language capabilities (53 percent each).
According to Alan Fung, partner of performance & technology, KPMG China, senior executives should be careful about making location choices based on cost.
"They should take into consideration the longer term needs of their business and how employing their outsourcing and shared services approach can align with their wider business growth strategy," he said.
The key rationale driving outsourcing strategies, Fung said, is no longer just cost arbitrage.
Equally or even more important is the need to ensure access to a reliable supply of abundant and skilled talent. Language, skills and infrastructure are all critical.
Google partners in China issue plea to Web giant
Wednesday, 17 March 2010 16:07
BEIJING—A group of Goolge Inc.'s partners in China have sent an impassioned plea to the Internet giant, saying their businesses are at risk if Google closes its Chinese search engine and demanding to know how they will be compensated.
The letter, viewed by The Wall Street Journal, states Google hasn't given its advertising resellers in China guidance since its announcement in January that it may pull out of China. The letter says the companies have watched their business decline and worry they face bankruptcy if Google withdraws.
The letter, which listed 27 Google advertising resellers in China, was sent Monday by email to John Liu, who leads Google's sales team and oversees the company's business operations in greater China, according to one of the resellers on the list, who spoke on the condition of anonymity.
The letter demands an explanation of how the resellers will be treated if Google has to leave China or shut down Google.cn.
A Google spokeswoman said the company had received the letter and was reviewing it. The letter was also posted on the Web site of China's state-run broadcaster.
The Google reseller said the companies are "facing operating pressure" due to the uncertainty of Google's status in China, but not all of the resellers had a part in drawing up the letter.
"Anyway, we really hope Google would face up to the problems and try to find ways to solve them," the reseller said, adding that a response hadn't been received as of Tuesday night.
Google, which has yet to follow through on an announcement in January to stop filtering search results on Google.cn, has been in negotiations with Chinese authorities over the extent to which it can continue operating, though it originally said the discussions would take place over a "few weeks."
The saga is being closely watched by Google users in China, which has the most Internet users of any nation and would be dominated almost entirely by easily controlled Chinese companies if Google exits the market. Analysts estimate the company has tens of millions of users here.
Convinced the company would take action on Monday, hundreds of Google users stayed awake the entire night to monitor search results on the Web site for any indication that filters had been lifted.
Users swapped analyses of results for keyword queries like "1989 student protest," a reference to the Tiananmen Square crackdown, because such content is considered politically sensitive in China and is often filtered.
Some users published screenshots of Google results that seemed to be uncensored, but it wasn't possible to determine what the causes of those inconsistencies were. As of Tuesday, Google's results were still censored in China.
"Many users are wondering why Google is so indecisive and some of them have lost their patience," said Issac Mao, an independent Chinese-Internet researcher and blogger.
Google's standoff with the Chinese government has highlighted the sometimes perilous regulatory web that entangles foreign companies in the country.
China operates a licensing system, policed by regulators, that requires all foreign investors to seek approval to conduct business activities within a defined scope. Companies that breach the terms of their license risk being closed down, which is the position in which Google now finds itself having declared it is no longer prepared to censor its search results.
No area of business in China is more politically sensitive than the Internet, or more heavily regulated. China bars foreign companies from owning an "Internet content provider" license to provide services in the country. For that, Google needed to partner with a Chinese company, which holds the ICP license from the Ministry of Industry and Information Technology.
A Google spokeswoman declined to comment on the status of Google's ICP license, but said licenses are "generally" due to be renewed this month. Still, it is unclear to what extent the license renewal is influencing Google's decision making, if at all, according to a person familiar with Google's China plans.
Google's commercial operations also have to be registered with the Ministry of Commerce. On Tuesday, Ministry of Commerce spokesman Yao Jian said Google has two companies registered, but so far the ministry hasn't received any reports regarding an exit of either company.
"If the two companies want to exit from China they will have to go through a procedure including reporting to the commerce ministry," Mr. Yao said, citing China's foreign investment law. He didn't elaborate.
Google grapples with a slew of agencies that have a say over the Internet. These include the Ministry of Public Security, which deals with criminal activities on the Web, including political dissent; the State Administration of Radio, Film and Television, responsible for broadcasting; and the Publicity Department of the Chinese Communist Party, which ensures that the media adheres to political orthodoxy.
For "anything that has to do with the Internet, you could be facing as many as a half dozen ministries," said David Wolf, chief executive of Wolf Group Asia, a Beijing-based marketing strategy firm.
Obama urges level playing field with China on trade
Thursday, 08 July 2010 13:23
In an attempt to create jobs through export growth and reassure U.S. business leaders that he is committed to trade, Obama singled out China as a key market where American firms would like to sell.
"Our discussion with China has also addressed the important challenge of how to create a more level playing field for American companies seeking to expand their access to the growing Chinese market," Obama said.
General Electric Co CEO Jeffrey Immelt was quoted last week as saying the Chinese government was growing increasingly protectionist and his manufacturing conglomerate was eyeing better prospects elsewhere.
Obama again "welcomed China's decision to allow its currency to appreciate in response to market forces," which Washington says will help make U.S. exports more competitive.
The Obama administration is expected to decline to name China as a currency manipulator in a regular report to Congress that could be delivered any day.
Obama vowed to push ahead with trade agreements and seek approval for stalled deals with three countries, in an acceleration of his trade agenda to boost growth by doubling exports in 5 years.
"At a time when jobs are in short supply, building exports is an imperative. But this isn't just about where jobs are today. This is where American jobs will be tomorrow," Obama said as he delivered a progress report on the ambitious export target for 2015 that he announced in January.
Last month Obama laid out a timetable for a long-delayed free trade agreement with South Korea, and said on Wednesday he wanted to iron out remaining issues related to U.S. trade deals with Panama and Colombia.
"We're focused on submitting them as soon as possible for congressional consideration," he said, but gave no timeline.
U.S. growth has returned after a severe recession, but hopes for an enduring upturn -- and a lift to hiring that pulls back U.S. unemployment from levels near 10 percent -- will depend in large part on the strength of its sales abroad.
Obama has been criticized by some in the business community for not being a convincing free-trade advocate, as well as for overly optimistic forecasts on export growth that will require more commitment to open up trade than he has shown so far.
"We're looking for the president to have a robust trade agenda that will create jobs in our economy. The answer is not just talking about it, but acting on it," said Myron Brilliant at the U.S. Chamber of Commerce in Washington.
But Obama must navigate a delicate domestic political path in an election year as he pushes free trade. Some members of his own Democratic Party, and its backers in organized labor, fear trade can hurt U.S. workers more than it helps American business unless fair play is enforced.
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