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Supply Chain Leaders: YTO Express.

Supply Chain Leaders: YTO Express.

Snapshot

Founded in 2000, China`s largest and fastest growing express delivery company, YTO now employs more than 180,000 workers in 20,000 delivery centers across China. YTO delivered 14 billion packages last year. It`s services cover warehousing, distribution and special transport.  In 2014 it launched it`s 90% owned subsidiary YTO Cargo Airlines which initially began operations, out of its Hangzhou hub.

 

 

Shanghai Yuan Tong Express Co., Ltd. (YTO Express) is now the largest express delivery business, by market share, in China after taking advantage of the booming domestic e-commerce industry. Yu Weijiao, YTO chairman, has turned the company into a market leader in China. With 84 centers in Beijing alone and 20,000 country-wide, the group is taking advantage of the government's decision to realign the economy from cheap, mass-produced exports toward more sustainable consumer-fuelled domestic growth.

 

 

In 2015 the company's revenue reached 204 billion yuan ($37.79 billion), up 42% compared to the same period in 2013, during a time of slowing economic activity, up to 19 billion yuan of which was indirectly generated by express delivery services, and that figure is expected to reach 60 billion yuan by 2020.

 

 

During the 2015 Singles' Day on Nov. 11th, the company received a record-breaking 53.28 million orders across China. The group handled more than 30.59 million packages, or roughly 21 percent of the industry's total.

 

 

Key to YTO's success has been expansion: from YTO's humble beginnings in 2000 when it started with a meager investment of 50,000 yuan and employed 17 staff the group now employs 180,000 staff and operates a network that covers about 93 percent of the counties across the country. In 2014, YTO delivered 2.1 billion packages, generating revenue of 24.6 billion yuan. The maximum number of parcels handled in a single day last year hit 25 million.

 

 

Outlook

With huge growth potential in the Express delivery sector amid strong competition from competing companies only the strongest companies are expected to survive, while smaller players are likely to link up with the leading companies such as YTO.

 

 

As the State Council approved a proposal to promote the development of the express delivery sector, which will be worth 800 billion yuan by 2020, the key is to increase international competitiveness and expanded air delivery capacity facilitating the rapid rise of cross boarder e-commerce.

 

 

YTO also plans to expand its air cargo operations as the company completed the maiden flight of its first aircraft in September 2014. It hopes to have a cargo fleet of 50 aircraft by 2020 and 100 in 2025.

 

 

Although YTO has plans to take the company public, a timetable has yet to be announced, as the company is aiming at building a highly competitive international network first: last year, the group set up an overseas business department and the company has registered its trademark in more than 100 countries.

 

 

They plan to establish about 20 overseas branches in countries including South Korea, Australia, the United States, Thailand, India, Russia and France.

 

 

The Asian Infrastructure Investment...

The Asian Infrastructure Investment Bank: Aim, structure & financing

Designed to provide financial support for infrastructure development and regional connectivity in Asia the bank is headquartered in Beijing, China. Its first President, Mr Jin Liqun was elected in January 2016. The purpose of the Bank is twofold: to foster sustainable economic development, create wealth and improve infrastructure connectivity in Asia by investing in infrastructure and other productive sectors; and secondly promote regional cooperation and partnership in addressing development challenges by working in close collaboration with other multilateral and bilateral development institutions.

 

 

Under its Articles of Agreement, the AIIB's functions include: (i) promoting public and private investment in the Asia region for development, in particular for infrastructure and other productive sectors; (ii) utilizing the resources at its disposal for financing such development in the region; and (iii) encouraging private investment  that contributes to economic development in the Asia region, in particular in infrastructure and other productive sectors, and supplementing private investment when private capital is not available on reasonable terms and conditions.

 

 

As of January 2016 the founding members are: Australia, Austria, Azerbaijan, Bangladesh, Brazil, Brunei Darussalam, Cambodia, China, Denmark, Egypt, Finland, France, Georgia, Germany, Iceland, India, Indonesia, Iran, Israel, Italy, Jordan, Kazakhstan, Korea, Kuwait, Kyrgyz Republic, Lao PDR, Luxembourg, Malaysia, Maldives, Malta, Mongolia, Myanmar, Nepal, Netherlands, New Zealand, Norway, Oman, Pakistan, Philippines, Poland, Portugal, Qatar, Russia, Saudi Arabia, Singapore, South Africa, Spain, Sri Lanka, Sweden, Switzerland, Tajikistan, Thailand, Turkey, the United Arab Emirates, the United Kingdom, Uzbekistan, and Vietnam.

 

 

Financing & Operations.

The authorized capital stock of the AIIB will be US$100 billion, divided into 1 million shares having a par value of US$100,000 each. The original authorized capital stock will be divided into 20% paid-in shares and 80% callable shares.

 

The basic parameter for allocation of capital stock to members is the relative share of the global economy of members (based on GDP) within the regional and non-regional groupings, with the understanding that the GDP share is indicative only for non-regional members.

 

 

What are AIIB's key financial instruments?
The AIIB will focus principally on financing specific projects or specific investment programs, equity investments; and guarantees. It may: (i) make, co-finance or participate in direct loans; (ii) invest in the equity capital of an institution or enterprise; (iii) guarantee loans for economic development; (iv) deploy Special Funds resources in accordance with the agreements determining their use; or (vi) provide other types of financing as may be determined by the Board of Governors.  Special Funds would be donor funds that are given to the Bank for use consistent with its purpose and functions.

 

 

Future Capital.

In addition to the capital subscribed by members, the AIIB will raise funds primarily through the issuance of bonds in financial markets as well as through the inter-bank market transactions and other financial instruments. The AIIB may raise funds, through borrowing or other means, in member countries or elsewhere, in accordance with relevant legal provisions.

 

 

Hainan Airlines: China’s Favorite...

Hainan Airlines: China’s Favorite Long-Haul Carrier?

Hainan Airlines is the fourth largest carrier in China in terms of fleet size. However, it is the only airline based in the People’s Republic to earn a five star rating from Skytrax (not counting Hong Kong’s Cathay Pacific).

 

 

Much of Hainan’s service is focused on its namesake island, which is becoming a major tourist destination for both domestic and international travelers. In addition to its main base in Hainan’s provincial capital, Haikou, the carrier has a hub in Beijing and a number of focus cities around China (including in economic hotspots like Chongqing and Shanghai).

 

Building on its five-star reputation

Now, the upstart airline is trying to take its five-star reputation to the bank by continuing to expand its international route offerings. The carrier plans to launch service to both Tel Aviv and Manchester, England starting next year.

 

Hainan has adopted a strategy that has become rather popular amongst up-and-coming airlines. In Manchester, they have found a market that has yet to be tapped. London residents already have nonstop connections to Beijing, but Manchester does not yet have such a service. Hainan’s goal is to create a new “air bridge” between Northern England and China. This kind of service is often appreciated by people in “secondary” cities because it means they do not have to travel to another hub in order to fly overseas.

 

Adding more and more international routes

This is not the first long-haul route that the airline has added to Hainan’s map. In fact, the Manchester service, slated for takeoff in June of 2016, will be the sixth major transcontinental route launched in recent times. The airline’s Beijing-San Jose flight is another example of trying to develop service in a new, underserved marketplace. Today, most transpacific flights take off from SFO, requiring a train or taxi trip north for travelers from San Jose and other parts of the Southern Bay Area.

 

Hainan Airline’s other new long-haul routes are Chongqing-Rome, Shanghai-Boston, Shanghai-Seattle and Beijing-Prague.

 

According to the carrier, more intercontinental flights are in the works. Hainan is banking on its image as a premium airline to differentiate itself from others in the crowded Chinese marketplace. They claim to have better food, better service and more spacious seating than the competition. These claims are backed up to a certain extent by the Skytrax rating, which is based on flier survey results. Billing itself as a premium airline has always worked quite well for one of Hainan’s main competitors, Cathay Pacific.

 

Domestic expansion

Hainan has also become a major player on the domestic front. It has snapped up or launched a number of regional carriers including business-oriented Beijing Capital Airlines, Fuzhou Airlines and Kunming-based Lucky Air. They are also a minority stakeholder in Hong Kong Airlines.

 

Hainan Airlines is obviously focused on leaving its niche behind and becoming one of the major players in China’s long-haul and domestic marketplaces. The strategy of expanding into underserved destinations like Manchester could work in the airline’s favor. At the very least, it is a welcome trend both for Chinese travelers (and East Asian fans of Manchester’s two popular soccer franchises) and for English fliers who are heading to China and don’t want to have to connect through London or another European hub.

 

Source: Travelpulse.com

Why China will remain a major sourcing...

Why China will remain a major sourcing hub.

There have been countless articles and books about China’s reign as the factory of the world coming to an end. While it is true that wage increases are making some of China’s lower-end industries, such as textiles, less competitive vis-à-vis other low-cost countries such as Viet Nam, Cambodia and Bangladesh, China remains one of the top procurement sources for mid- to high-tier products. For instance, heavy equipment exports from China experienced a growth rate of about 30 percent in the last decade alone. Even as some of the lower-end industries move out, there is more to a country’s competitive supply chain than labor costs. China maintains a set of key factors that will continue to make it a competitive exporter even as the economic landscape shifts. These include:

 

  • High-quality infrastructure (especially export-related infrastructure): China’s rail and road infrastructure, particularly along the coastal cities, are among the most developed globally. With a history of double-digit investment in infrastructure, China’s ports complement the rail/road infrastructure. Shanghai long surpassed Singapore as the world’s busiest port and it will be a while before key competing countries can match China’s current (and continuously developing) infrastructure.

 

  • Increasing qualified labor force: China produces hundreds of thousands of graduate engineers and scientists each year to be absorbed into the local industries. Moreover, China now has the world’s largest student population studying overseas with a sizeable number returning upon completion of their studies. Although there has been renewed attention to quality rather than quantity in the number of graduates, the increasing education level will boost China’s competitiveness vis-à-vis some of the other low-cost sourcing destinations.

 

  • Growing research and development expenditure leading to higher innovation capacity: Despite the reputation for copying, China’s innovation has continued to pick up pace. A report by McKinsey & Company (Greater China) highlights innovation in areas such as renewable energy, consumer electronics, instant messaging and mobile technology. As internal and external competition increases, China is also focusing on price reduction, adaptation of business models and supply chain development. This will lead to the elimination of less efficient firms, both domestically and those focused on the export market.

 

  • Lower costs relative to industrialized countries: Despite double-digit growth in both wages and currency appreciation during the past decade, China’s minimum wage still stands far below that of industrialized countries. Rising wages are correlated with increasing productivity. Therefore countries competing with China for lower costs will have to also compete with increased productivity and vice versa.

 

  • Specialization, not only at sector level, but also at product level: China’s specialization in various products remains unparalleled globally. There are entire towns dedicated to producing a single product. For instance, Shenyang, a city in northeast Liaoning Province, has developed a reputation for its heavy industry, particularly in the manufacture of automobile and light machinery. The Pearl River Delta is known for textiles/electronics industries, whereas Shenzhen has become the IT hub of China. Moreover, the product range available in these agglomerations is diverse, catering for low- to high-end products, resulting in differentiation as a key competitive factor.

 

  • Pro-export policies: It is true that the Chinese authorities have decided to alter the export-led growth model to one focused on domestic consumption. However, the country’s “going out” policy combined with an increasing saturated domestic market, especially in sectors related to fixed assets investment such as steel, cement and heavy equipment, continues to have explicit support (via export rebates or subsidies) or tacit support (high barriers to entry, licensing requirements), especially at local level. This support will continue to boost Chinese exports’ competitiveness – at least in the short term.

 

 

A shift inland: As the coastal areas become expensive, investment in areas such as Chengdu, Xining and Chongqing, which are a distance from the coast, continues to see increasing direct investment from both local and foreign firms. As well as taking on relocated industries from the PRD (Pearl River Delta) area, these regions are also leading the way for new industrial development in Hi-Tech fields. This is not to say that the inland does not pose its own problems, but over time it may prove easier to shift inland than abroad.

 

Travel giants integrating services:...

Travel giants integrating services: Ctrip & Qunar

The business of selling airline tickets and resort vacations to China's holiday-happy middle class is now a battleground for Internet giants, following a deal that brings Ctrip.com International Ltd. to the fore.

 

Ctrip was already the country's biggest online travel agency before announcing a share-swap agreement on October 27th that gave it virtual control of traveler services provider Qunar Cayman Islands Ltd., a subsidiary of the Internet search giant Baidu Inc.

 

 

In the deal, Baidu transferred 45 percent of its stake in Qunar to Ctrip. In turn, Baidu got a 25 percent stake in Ctrip. The swap strengthened Ctrip's grip on what market research institution iResearch says is China's 270 billion yuan online travel agency market. Ctrip already owns 37 percent of eLong Inc. and 6 percent of Tuniu Corp.

 

The tie-up of the two Nasdaq-listed companies with a combined market value of US$ 18 billion set the stage for a three-way travel market battle pitting Baidu and its new partner Ctrip against the nation's dominant social media company Tencent Holdings Ltd. as well as e-commerce leader Alibaba Group.

 

Tencent has an online travel information section on its qq.com platform, an instant messenger. The company has also invested US$ 84 million in travel service provider eLong in 2011 and US$ 78 million in LY.com in 2014.

 

Alibaba, meanwhile, has had one foot in the travel agency door since 2010 by selling ticket and hotel booking services through its Tmall and Taobao websites. It's also invested millions of U.S. dollars in several online travel sites including qyer.com and baicheng.com. And in October 2014, Alibaba formally launched its own travel service division called Alitrip.

 

But through their new partnership, Ctrip and Qunar now account for nearly 70 percent of all revenues generated through the country's online travel market.

 

 

Alitrip's is pitching it`s service as an open platform through which travelers and qualified service providers can find each other. Future plans call for offering various traveler conveniences, such as hotel room deposit waivers based on a client's credit record with Alibaba. In its first year of operations the company signed up more than 100 million members and averaged more than 10 million daily webpage views. But it's still lags behind Ctrip and Qunar.

 

And although big brands rule the market, a number of new players have recently joined the online travel services game. One is the group-buying website company Meituan.com, which for the second half of this year reported 5.3 billion yuan worth of hotel bookings as well as 1.8 billion yuan worth of other travel-related deals. Meituan established a new division in July aimed at expanding its services.

 

China is also seeing traditional, storefront-based travel agencies increasing their online exposure opportunities through a growing number of new websites.

 

Nevertheless, the country's online travel giants have fortified their market positions in ways that should keep their new rivals at bay for a long time. For several years the market had anticipated a Ctrip-Qunar merger.

 

Integrating Services

The main focus of the merger is as a way to streamline business and counteract competitive pressure since many domestic companies in this industry are running in the red.

 

For the second quarter, Qunar reported an 816 million yuan loss. Elong.com registered a 356 million yuan loss and Tuniu said it lost 292 million yuan in the same period.

 

Ctrip outperformed its rivals by posting a 143 million yuan net profit for the second quarter, a 5.9 percent increase from the same period last year.

 

Baidu, meanwhile, has been singled out by market analysts as the biggest winner in the deal between Ctrip and Qunar. The search engine had controlled Qunar since buying a 62 percent stake for US$ 306 million in July 2011, just a few months after expanding into what was then a fledgling market for online travel services.

 

Ctrip and Qunar will likely continue to operate separately yet complement one another. Ctrip will focus on the business traveler, hotel and ticketing operations, while Qunar will function mainly as a platform for a variety of travel services based on packages, search and price comparisons.

 

But the merger also presents challenges for the companies involved. Baidu, for example, must figure out how to integrate and distribute traffic and resources between Ctrip and Qunar. In the short term Ctrip and other travel booking sites are expected to continue relying on investments to keep their businesses growing whilst being forced by the competitive environment to offer services at discounted rates.

 

China’s shrinking currency reserves:...

China’s shrinking currency reserves: really economic gains

Since mid-2014 Chinese currency reserves have shrunk by about 10 percent. This reduction culminated in August 2015 when the Chinese Central Bank responded to market pressure towards a weaker CNY and let the exchange rate fall by about 4 per cent in several steps. By following market sentiments, the Central Bank underlined its announcements to give market signals larger weight in exchange rate determination rather than to defend exchange rates, in particular not to defend a fixed single currency peg against the dollar.

 

However, both the timing and the sequencing of the Central Bank’s interventions were negatively perceived by markets in a situation when sizable corrections in Chinese stock markets occurred and when doubts about the sustainability of the medium-term growth path of the Chinese GDP of around seven percent shocked both traders and investors. To contain overshooting in currency markets and stabilize expectations that the Chinese economy is not facing a hard landing, the Chinese authorities leaned against further pressure of capital outflows and CNY exchange rate weakening and sold foreign currency denominated assets.

 

What appears a balance sheet loss, however, is in fact an economic gain.

 

More exchange rate flexibility in general and the exchange rate depreciation in particular helps Chinese authorities to ease the so-called currency mismatch.  Unlike many other emerging markets which are indebted in foreign currency and earn profits in local currency, China earns low profits in foreign-currency denominated interest-bearing assets and at the same time must foot the bill of eventually overindebted local investors, private and para-statals alike, all in local currency. Currency depreciation raises the value of currency reserves in local currency and helps to soften local budget constraints. In this respect, China is in a similar situation as Russia where the depreciation of the ruble has also helped to achieve balancing the local budget. Declining currency reserves (albeit from a record-high level) are the companion piece of reducing current account surpluses and stabilizing the Chinese current account surplus (as percentage of GDP) at a 3 percent level, much below pre-2010 levels.

 

 

Thus, the days are gone when the question whether Chinese-US trade were fair was answered sarcastically: yes, it is fair: China exports toxic toys and the US exports toxic papers.

 

In fact, while China now has sold some of the (non)-toxic papers, the structure of US (and other Western countries’) capital imports from China undergoes an important shift from interest bearing assets to equity assets, such as portfolio investment and foreign direct investment.

 

This shift decouples China somewhat from the sovereign risk of being exposed to possible debtor country defaults. At the same time, due to massive real wage increases in China over the last decade (equivalent to a real appreciation of the CNY) which was not at all compensated by recent nominal depreciation, Chinese companies for reasons of competitiveness were forced to substitute parts of direct exports for foreign production. Alternatively, China had to upgrade its export mix and thus to export more high-technology products such as commercial drones which are far from being discredited as “toxic”.  Hence, fewer currency reserves not only improve the quality of remaining reserves (in terms of reducing the share of non-performing claims on debtor countries). They also let China participate in risk-sharing of global equity investment in foreign currencies such as US-Dollar, Euro, Pound Sterling and Yen. A further depreciation of the CNY would improve the net foreign equity position of China measured in local currency as foreign equity investment of China is denominated in foreign currencies and therefore benefits from CNY depreciation.

 

In short, on both sides of the balance, the degree of toxicity of traded products and papers decreases with decreasing size of imbalances and decreasing currency reserve accumulation.  This is an important gain for the trading partners as well as for the world economy.

 

The decline of Chinese currency reserves has another politically important side effect. A country selling some of its foreign assets does the opposite of a country pursuing a “beggar thy neighbor” strategy of exchange rate undervaluation and currency manipulation. The suspicion that China manipulates its currency in order to defend jobs in the export industry is old. It is raised in the US quasi automatically when current imbalances rise and can gain momentum once nominal depreciation is identified as a political strategy rather than as a response following the markets. Chinese authorities would be well advised to act against this suspicion by beginning to swap external monetary anchors such as currency pegs for internal monetary anchors such as inflation targets.

Source Merics 2015

 

COFCO (China National Cereals, Oils...

COFCO (China National Cereals, Oils and Foodstuffs Corp).

Overview.

 

 

COFCO Corporation is a leading supplier of agri-products, diversified foodstuffs and services in China, integrating agri-trading, logistics, processing, production and sale links, and providing grain and oil products to one quarter of global population. At present, COFCO owns over 180 processing factories domestically with 2.3 million terminal points of sale covering 952 large and medium-size cities, and more than 100 thousands counties, towns and villages.

 

 

COFCO boasts a wide range of branded products and service portfolios, including Fortune edible oil, Great Wall wine, Le Conte chocolate, Tunhe tomato products, Joycome meat products, Xiangxue flour, The Cereal Way instant noodle, Lohas fruit juice, Joy City shopping mall, Yalong Bay resorts, China Tea products and COFCO-Aviva Life Insurance, etc

 

 

A Global Challenge.

 

 

COFCO has more than 10,000 employees in more than 70 nations and regions working in various overseas markets, mainly in Asia, Latin America and Europe. It plans to further improve its capability in maritime transportation and food processing, as well as the entire supply chain services in seed, pesticide and fertilizer businesses over the next five years.

 

 

Facing increased food security issues from factors such as extreme weather and dwindling farmland resources, COFCO is increasing becoming a global giant. The company is building grain and other agricultural product supply chains, particularly with countries in the Black Sea regions and South America, the world's two biggest grain-producing areas.

 

 

Last year, COFCO invested $1.5 billion for a 51 percent stake in the agribusiness operations of Hong Kong-based Noble Group, and reached an agreement with the Netherlands-based agricultural and commodity trading group Nidera BV to acquire 51 percent of its stock, which will see a fully integrated value chain created between the firms.

 

 

The acquisitions mean COFCO now holds more than $70 billion of assets and has a storage capacity of 15 million metric tons in more than 60 nations. Its total food processing capacity has reached 84 million metric tons and it is capable of shipping 44 million tons of agricultural products via various ports around the world.

 

 

Subsidiaries

 

 

COFCO Agri-Trading & Logistics

COFCO Tunhe

JOY CITY PPT

COFCO Engineering Technology

Mengniu Dairy

China Agri-Industries

COFCO Meat

China Tuhsu

Womai.com

Nidera

China Foods

CPMC

Financial Services Dept.

Huafu Group

Noble Agri

 

 

Outlook.

 

 

COFCO has committed to deploying resources and manpower along the Belt and Road Initiative routes over the next five years to help guarantee China's food supply at home and to its key markets overseas. Though the initiative is still in its early stages of development, it has strong implications for many nations along the routes that count on agriculture and international agribusiness cooperation. Many countries along the routes are key global grain producers, and COFCO will continue to seek investment and cooperation opportunities with them over the next five years.

The Future is Made in China: An Anal...

The Future is Made in China: An Analysis of Emerging Innovation Trends in China

In December 2014, the United Nations Development Programme (UNDP) in China, using the services of Futurescaper, launched a public website survey to receive more information on innovations trends in China.

 

 

This foresight exercise was meant to examine the climate of Chinese innovation, as reported by Chinese citizens and other experts from the general public residing in China or abroad. The assumption was that although many people think that China is good in copying and adapting products, a great deal of innovation might be going on in China which the world is unaware of. This Futurescaper exercise aims to reveal that products are not only “made in China” but that at the same time are part of “the future is made in China”.

 

Futurescaper’s tools help organizations uncover and map out the drivers and dynamics that their stakeholders think are most important, understand why they think this is, and explore what their implications are for the future. By combining human insight with analytics together with a great visualization tool, they make this process faster and cheaper than traditional scenario workshops, more insightful and interactive than surveys, and more participatory and empowering than traditional expert analysis.

 

To download the full report please click here.

Alibaba taking a lead on cross-border...

Alibaba taking a lead on cross-border e-commerce.

The global B2C cross-border e-commerce market will balloon in size to $1 trillion in 2020 from $230 billion in 2014, according to a report from global consulting firm Accenture and AliResearch. With this in mind it would appear to be Alibaba that is taking a lead in opening up new global markets.

 

   

 

In the report, “Cross-border B2C E-commerce Market Trends,” researchers forecast that this increasingly popular form of online shopping will see compound annual growth of 27.4 percent over the next five years. By 2020, more than 900 million people around the world will be international online shoppers, the report says, with their purchases accounting for nearly 30 percent of all global B2C transactions.

 

Cross-border online shopping is gaining popularity particularly in emerging markets, where consumers can find it hard to find affordable imported products in local shops. In many cases, the only alternative is shopping on websites in other countries or from marketplaces such as Alibaba Group's Tmall.com, a Chinese B2C website that hosts merchants from around the world.

 

While China is expected to drive much of the growth of cross-border e-commerce in coming years because of the country’s large and growing middle class AliExpress is making headway in selling goods from suppliers in China and other countries to online shoppers in Latin America.

 

Alibaba sells to consumers internationally through AliExpress.com, a site it launched in 2010, that sells goods in 40 categories directly to consumers in 200 countries, according to Alibaba. While Alibaba does not regularly disclose transaction volume on AliExpress.com, the company did report in advance of going public last September that the value of goods purchased on AliExpress.com exceeded $4.5 billion in the year ended June 30, 2014.

 

AliExpress has caught on in Russia, where Alibaba claims it’s the top e-retail site, and in Latin America. The company is now taking several steps to localize the site to better appeal to Latin American shoppers where is see good growth over the next few years.

 

Whilst Alibaba does not disclose its sales in Latin America web analytics company SimilarWeb estimates monthly visits from Brazil to AliExpress.com averaged 110 million during the first five months of 2015. 

 

Delivery remains the biggest challenge for e-commerce companies in Latin America, consumers must wait anywhere from 30-40 days to receive the products after he or she placed order. While it might take one to two weeks for a parcel to arrive from China to Brazil, the time for passing through Brazilian customs and delivery inside of country could easily double this delivery time.

 

Why do so many Brazilians shop on AliExpress if they have to wait a month to get their orders?  Providing a large product selection at much lower prices is the main draw.

 

To speed up delivery, Alibaba has collaborated since last year with the Brazilian postal service Correios to share parcel data. AliExpress also accepts many local payment options in the region, including OXXO in Mexico and Boleto in Brazil.    

  

Aliexpress.com launched a Spanish-language version of its site in 2014 to boost sales and also rolled out its first country-specific site, a Portuguese-language site targeting Brazilian consumers, at pt.aliexpress.com. The site enables merchants that sell on the web shopping mall to create customized promotions, such as deals based on local holidays.

 

The Spanish-language AliExpress.com also has sections that highlight suppliers Alibaba has authenticated, such as those from Chile and Peru, to increase consumer confidence in shopping on AliExpress.com. Those sections also enable local merchants to sign up to become authenticated on Alibaba’s sites. Besides Chile and Peru, there are similar sections of AliExpress.com highlighting merchants from Mexico, Colombia, Brazil and Argentina.

 

Investing in the Chinese Stock Market

Investing in the Chinese Stock Market

Foreigners can indeed buy stocks and shares in both the Chinese mainland and Hong Kong, although it’s not always as straightforward as it might be for them back home. 

 

Playing the Chinese stock market

 

 

The Chinese stock market is divided into three kinds of shares: A Shares, which are restricted to Chinese citizens and Qualified Foreign Institutional Investors; B Shares, which are open to all foreigners, and H Shares, which are Hong-Kong-based shares and also open to foreign investment.

 

In order to trade in A Shares, which are bought and sold in RMB, foreign companies must first get a bank to submit a Qualified Foreign Institutional Investor application form to the China Securities Regulatory Commission (in order to get a permit allowing them to invest in RMB) and also submit an Investment Quota Application to the State Administration of Foreign Exchange.

 

Once these have both been done, the company can then approach a Chinese securities company to make the investment. However, there is a high threshold for entry: the company must own at least $500 million (for insurance companies, asset management companies etc) or $5 billion (for foreign securities firms and banks). 

 

The B Shares use US dollars or HK dollars as denominations and are issued by Chinese companies listed in the Chinese mainland – although ironically they cannot be bought by Chinese citizens. If you want to trade in these shares, take your passport and residence permit to a securities firm to open a B Share account. You will need to deposit at least $1,000.

 

H Shares are bought in HK dollars, and are issued by Chinese companies listed in Hong Kong. In order to invest in these shares, you must go to Hong Kong and open an investment account in a HK bank, putting in at least 10,000 HK dollars. The account can be opened with your HK visa, your passport and your Chinese mainland residence permit. You must go to Hong Kong in person to open the account, but then you can return to the mainland to make deals online. It is open to anyone, foreign or Chinese.

 

Foreigners can also buy funds and bonds in China from commercial banks, securities firms and other sales agencies, by opening a fund or bond account at said agencies. 

 

Security tips for investing in stock market

 

  • If you are signing up to a securities firm online, make sure that the website is legitimate and not a clone or fake. Genuine securities firms do not promise profits or returns, and they will sign printed consulting contracts with you if you use their services. In addition, they are only allowed to receive money via company or business accounts, not personal accounts.

 

 

  • Do not trust anyone who claims to have insider information on stock market trading.

 

  • Do not trust anyone – even a so-called expert – who claims to be able to give precise predictions of the stock market. Likewise, don’t trust trading software that claims to be able to predict the stock market’s movements.

 

Employing Chinese staff: Tax & welfare...

As an employer in China, you have obligations regarding tax and welfare contributions for your Chinese staff – the following sets out the various taxes you are obliged to pay on their behalf.

 

Tax

Employees pay Individual Income Tax on their earnings. It is the employer’s responsibility to calculate and deduct each employee’s contribution from their wages or salaries every month. The company then submits the tax deduction to the tax authority. The company’s role in this is purely administrative. The company itself does not need to make a separate contribution on behalf of Chinese employees.

 

Different kinds of welfare contributions

Welfare contributions are a different matter. Employers must make contributions on behalf of each Chinese employee to China’s social insurance system, known as the “Five Insurances,” plus a housing fund. The Five Insurances comprise a pension fund, medical insurance, industrial injury insurance, unemployment insurance and maternity insurance.

Below is an outline of what the employer and employee respectively contribute to each fund.

 

Pensions

What employer contributes: Varies from region to region, but usually equivalent to around 20 percent of employee’s salary.

How employer benefits: No direct benefits for employer.

What employee contributes: ​Eight percent of salary.

How employee benefits: Upon retirement, employees who have contributed to their personal pension fund for at least 15 years can receive a pension based on the total amount they have contributed personally in their working life. If personal fund runs dry, the employee can receive a pension drawn from the public fund (which employer contributions are directed into).

 

Medical insurance

What employer contributes: There are regional variations, but it’s usually equivalent to between seven and 12 percent of the employee’s salary.

How employer benefits: No direct benefits for employer.

What employee contributes: ​Regional variations, but usually two percent of the employee’s salary.

How employee benefits: If the employee is sick or injured, a percentage of their treatment costs is covered by medical insurance (how much depends on what they are being treated for). Employees also carry a health insurance card; its value is equivalent to the total contributions they have made to their personal medical insurance fund to date. The money on the card can be used to pay for medicines and hospital out-patient costs. 

 

Industrial injury insurance

What employer contributes: Ranges between 0.4 and three percent of employee’s salary (varies based on type of work).

How employer benefits: If an employee is injured at work, their medical care is covered by this fund. However, the employer must continue to pay the employee’s salary for as long as they are unable to work (up to a maximum of 12 months).

What employee contributes: No contribution required.

How employee benefits: If the employee is injured at work, their medical care will be covered by the industrial injury insurance fund (as well as the medical insurance fund).

 

Unemployment insurance

What employer contributes: Usually two percent of employee’s salary.

How employer benefits: No direct benefits for employer.

What employee contributes: ​Usually one percent of salary.

How employee benefits: Employee will receive unemployment benefits for up to 24 months if they are made redundant (but not if they quit their job). Employee must have been making contributions to Unemployment Insurance fund for at least one year continuously to qualify for benefits.

 

Maternity insurance

What employer contributes: Usually equivalent to between 0.5 and one percent of employee’s salary.

How employer benefits: Employer does not need to pay employee’s salary during employee’s maternity leave (usually three months).

What employee contributes: ​No contribution required.

How employee benefits: Employee receives a fixed sum for each month (paid for by maternity insurance fund) during their maternity leave. Alternatively, they can receive a lump sum to help cover cost of birth. Fathers may also apply for compensation during paternity leave (up to 15 days, but allowance depends on region).

 

Housing fund

What employer contributes: Usually equivalent to between seven and 13 percent of employee’s salary.

How employer benefits: No direct benefit for employer.

What employee contributes: ​Usually equivalent to employer’s contribution (though there are regional variations).

How employee benefits: Fund contributes to employee’s house purchase.

 

Mobile commerce: The App`s China uses

Mobile commerce: The App`s China uses

5G is coming and with it means the ability to use mobile devices in ways not possible today. While there are already more mobile devices than people on the planet, they will continue to have increased capacity and capability. Announcements and advertisements must now be appealing on the small screen.

 

Chinas Mobile advertising market is currently the fastest growing sector for companies involved in retail. Now exceeding PC users, the mobile internet market represents the forefront of technology and dynamism in China. In Q1 2015, the total transaction value of China e-commerce market is estimated to have exceeded RMB 3.48 trillion (USD$567.49 billion). With these sorts of numbers no company can afford to ignore the apps where potential clients spend a large proportion of their time. Mobile devices have become the customer's primary means of interaction with companies. 

 

WeChat is leading the field in app`s and is unique in both being a native mobile application and including integrated e-commerce and mobile payments: A quick referral of a product from a friend and a purchase can be made in a matter of moments while the user may never have to leave the WeChat application on their mobile phone.

 

Brands can use WeChat in a few ways to support sales growth, including setting up their own brand shops (as service accounts), working with malls (WeChat operates a couple of their own), using direct sales platforms for user-generated sales (like Weidian that has payments linked to WeChat), and using loyalty cards for location-based promotions and member offers (managed by WeChat inside the app under "QQ iCard").


 

Chinas Most populat Mobile Apps

 

 

Sohu News

Type: News

No of active users: 78,59 million

 

 

Sogo Input

Type: Chinese Pinyin input method

No of active users: 80.08 million

 

 

360 Mobile Assistant

Type: App store

No of active users: 85.91 million

 

 

Taobao

Type: Online shopping

No of active users: 98.01 million

 

 

UCWeb

Type: Mobile browser

No of active users: 98.14 million

 

 

QQ Browser

Type: Mobile browser

No of active users: 106.08 million

 

 

360 Phone Guardian

Type: Anti-virus security

No of active users: 110.33 million

 

 

QQ Music

Type: Music

No of active users: 129 million

 

 

QQ

Type: Instant messaging

No of active users: 307.33 million

Having lost ground in terms of users to Wechat, qq is now the 2nd most popular messaging app in mainland China, it allows users to write and maintain their own blog/diary, as well as photo album.

 

 

WeChat

Type: Instant messaging

No of active users: 359.87 million

Most of us are familiar with WeChat, which is now the most popular messaging app in Mainland China. In addition to messaging functions, the app allows you to search for people in your area and also allows users to maintain a blog along with some photos

 

Data source: compiled by EnfoDesk, an online research institute, Rankings are based on the number of active users as of May 2015.

The Branding Dichotomy: Trust & Pricing...

The Branding Dichotomy: Trust & Pricing point.

Chinese consumers are both brand conscious and price sensitive: the key to understanding this dichotomy is to appreciate Chinese culture, where face and social status are crucial as well as the prevailing attitude of a lack of trust in product quality. This skepticism leads Chinese shoppers do significantly more research, across many more channels, than their counterparts in the West. If a brand can signal a higher social and/or economic status, Chinese consumers are happy to pay a premium. If it doesn’t, they become very price sensitive as well as skeptical about quality.

 

 

eBay requires buyers to pay first and then wait for an item to be delivered. This model works in societies where the trust level is high. However, there is a serious lack of trust in China between consumers and manufactures, so asking buyers to pay first without seeing the product is a hard sell. That’s why eBay failed in China. Conversely Taobao came up with a different model: It introduced a third-party payment system, namely AliPay, where buyers pay to a third-party account owned by Alibaba (Taobao’s holding company), and only after they have confirmed receiving the products in good order, Alipay will transfer the money to the seller. This model effectively solved the trust issue in e-commerce.

 

Throughout China`s history companies of all sizes have consistently lied to their consumers, and this is why, even today, the Chinese are so cynical and suspicious about purchasing products, especially online. Facts that might be taken for granted by western consumers will be questioned vigorously in China, and it is necessary to cultivate trust from a low starting point. The challenge for companies is to prove to consumers that their products are rigorously inspected and tested.

 

Whilst having a natural advantage in the trust area, foreign brands now have to compete move vigorously with domestic brands, especially in budget/mass consumer products. There is also a growing sense of pride in “buying Chinese” which is being utilized to the max by a growing force of domestic brands such as Xiaomi and Anta. A spate of investigations into foreign big name brands a few years ago has eroded the unquestioning faith in western brands, who must now concentrate on the core values of integrity and honesty.

 

The Chinese may be relatively new to the consumer world, but they are far from naive. They look much deeper than colorful billboards and TV commercials. Increased foreign travel, burgeoning Social media and increased awareness of consumer rights have helped the Chinese consumer become ever more sophisticated.

 

One area in which foreign companies still outdo their Chinese counterparts is in customer service: with rising expectations amongst the growing middle classes there is still a stark difference between a walk trough an Apple store compared to a domestic computer shop with a traditional sell and forget attitude. However this is also fast changing with Private Banks and Airlines taking the lead. Consumers are becoming savvier, and insistent on, good service, and domestic producers are taking notice. In the high growth regions of 2nd and 3rd tier cities the personal touch is an incredibly effective marketing tool where the standards of customer care remain low.

 

The days of “Made in China” are now progressively being replaced by “Made for China” foreign companies have to truly understand the needs and changing characteristics of Chinese consumers, and build quality products and services to meet these needs. Crucial to the message is their utilization of social media and brining the latest in consumer services to China.

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