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Inflationary trends in the shipbuilding sector push newbuild cost up, whils orders are...

Inflationary trends in the shipbuilding sector push newbuild cost up, whils orders are down.
Affected by the covid-pandemic domestically, the major shipbuilding indexes of Chinese shipyards showed clear decline during January-April 2022.

According to the statistics released by China Association of the National Shipbuilding Industry (CANSI), the newly received shipbuilding order volume for Chinese yards was 15.39m dwt, down 44.8% year-on-year. Shipbuilding output was down 8.6% at 11.71m dwt. Orders on hand were 102.47m dwt as the end of April, an increase of 21.7% year-on-year.



Shipbuilding export volume for the first four months of the year was 10.28m dwt, declining 14.8%, while newly received export shipbuilding orders were 13.66m dwt, dropping 44.7%. Export orders on hand were 90.17m dwt as the end of April, up 20.5%.


Production at major yards in Shanghai have been hit the city’s lockdowns since late March although recent weeks have seen moves to get large-scale industrial production such as shipyards back into operation. Meanwhile globally newbuilding orders from shipowners have come off from last year’s peak. Shipbuilding export volume, new orders for export and export orders on hand accounted for 87.8%, 88.8% and 88% of national volume respectively. The export shipbuilding value was $5.83bn in the first four months, declined 10.2% year-on-year.


Chinese shipbuilding output, newly received orders and orders on hand respectively accounted for 43.8%, 54.1% and 48.5% of the global shipbuilding market share.


Simultaneously Inflationary trends in the shipbuilding sector have pushed new ship prices up by 25% since their November 2020 low, the steepest rate of increase since 2005.


Ship prices, in nominal terms, are now at their highest level since 2009. Further increases are likely, as raw material and energy prices continue to climb. Newbuilding prices vary across ship types, with container ships climbing most. A 15,500 teu vessel now costs close to 50% more than it did 15 months ago, at the beginning of 2021. Capesize bulkers are up by almost a third, MR tankers by 21%, and LNG carriers by some 18%.



The price of steel is one factor, with Chinese plate costing more than $800 a tonne, up by $250 over the last 24 months. Although  lower contracting volumes are expected this year due to higher prices, longer lead times, and uncertainty around future fuels, inflationary pressures on shipyard costs could yet push prices higher.


Many shipyards are now booking building slots for 2025 while the relatively small number of deepsea LNG shipbuilders are working on contracts for 2026. Sipyard forward cover is estimated at, measured in compensated gross tons, 2.9 years, up from 2.4 years in November 2019.


Even without today’s inflationary pressures, there is no doubt that the ships of tomorrow will cost more. That’s because they will be designed with engines that can adapt to a changing bunker backdrop while many will also be fitted with energy saving technologies.


Source: Sea Trade Maritime News




Shanghai Faces Long Road to Recover...

Shanghai Faces Long Road to Recovery as Lockdown Lifts

Shanghai faces weeks, if not months, of slow recovery until economic activity can fully bounce back from the crippling Covid lockdown that began in March. Based on the experiences of other Chinese cities like Wuhan in 2020 and Jilin earlier this year, it will take time for shops to reopen or factories to secure supplies and ramp up production. Labor shortages could emerge and the knock to business and consumer confidence will likely linger. Even though the majority of Shanghai’s 25 million people are able to move freely in the city from Wednesday and some shops are resuming, many factories and businesses are still closed or operating below capacity. The world’s largest port in the city remains backed up and truck traffic is at about a quarter of pre-pandemic levels.



In Wuhan, it took until 2021 for the economy to recover from the damage sustained from the initial Covid-19 outbreak in 2020 and the more than two month lockdown that followed. And the economy of Xi’an took months to rebound from the lockdown that ended in late January this year: retail sales in the city through the end of March were down 15% on last year and in the whole province of Shaanxi it fell 2.4% this year through April, according to official data.


“We’re talking about long supply chains that have been disrupted for more than 8 weeks so it will take some time to stabilize,” said Eric Zheng president of the American Chamber of Commerce in Shanghai. The shutdown has been a “huge test” for global supply chains, he said, and while the government has been working on reducing transport bottlenecks, there are still restrictions on drivers crossing into Shanghai or leaving the city to go to other provinces.


While the Covid-19 outbreak in Shanghai wasn’t as severe as the one in Wuhan in 2020, Shanghai’s economy is bigger and it’s more connected to global supply chains than Wuhan. Shanghai and its surrounding provinces are one of China’s industrial heartlands, with car and electronics manufacturers located there to access the port. The effects on supply chains of the two-month shutdown have rippled across the country and around the world, impacting supplies of critical components. “One of the biggest challenges is around inland logistics, in particular trucking to get goods from the factory to the port,” Heath Zarin, chief executive officer of logistics investment company EmergeVest, said in an interview with Bloomberg TV on Monday. The port is also backed up, with as many as 300,000 containers sitting on the docks, he said.


Long Recovery

The city’s government itself expects the recovery to take weeks at best, with Shanghai’s Vice Mayor Zong Ming saying in mid-May that authorities aimed to return to normal life and restore full production by mid-to-late June. Truck traffic in Shanghai has started to gradually pick up as the city relaxes Covid restrictions for drivers, but it’s still less than 30% of the weekly average in 2019. Nationwide, truck traffic in the week ending May 29 was 21% below the same period last year, and trucking capacity in Jilin province is still not back to normal more than a month after the lockdown there officially ended.


“The overall situation is still critical” although there has been a steady improvement of logistics and a slow improvement of raw material supply recently, according to Maximilian Butek, the executive director of the German Chamber of Commerce in China, Shanghai. Adding to that problem, if all companies go back into production from June 1, “everyone will want to get products shipped out but also receive the cargo they were waiting for over weeks. This will cause heavy congestion at the ports and will last for at least a couple of weeks.”


Usually after an outbreak it takes 2-3 weeks for local traffic to gradually return to normal, a month for production to return to the level before the outbreak and about two weeks for the short-term impact on consumption to subside, according to a report on Tuesday from Haitong Securities. A swift rebound in the economy will also depend on a recovery in consumption. Shanghai is one of the richest and most important consumer markets in the country, and the lockdown has decimated the sales of cars, luxury products, and everyday goods. Like most of the financial aid China has rolled out during the pandemic, much of Shanghai’s recovery plan is focused on businesses and the production side of the economy. Households haven’t been given the kind of direct financial support, like cash handouts, that have cushioned consumers from the blow of Covid lockdowns in other countries like the U.S. and in Europe. 


The city has now told the neighborhood committees to let people out of their homes, but there’s little clarity about when restaurants or shops can fully reopen and people can start working to recover the income lost since March. It will take time for movement around the city to recover as well — on Tuesday people took only 41,000 rides on the subway — well below the 9.8 million rides people took on average each day in 2021. Barricades at entrances of tunnels, bridges and overpasses were removed and more flights are planned at the city’s airports, according to local media reports. The congestion level in the city rose 6% at 8:30 a.m. local time Wednesday from the peak level registered in the past 30 days, according to data by map service provider Baidu Inc.


With government stimulus and overseas and domestic demand, the city is well positioned to rebound, although due to the full quarter of lost growth it will be challenging for China to meet the annual growth target of around 5.5%, according to AmCham Shanghai’s president Zheng. But any real comeback depends on what happens with the virus. With no change to the Covid Zero policy, a serious outbreak could once again plunge Shanghai or any other city in China into lockdown and decimate both the economy and people’s livelihoods.



Source: Bloomberg L.P


Development of China’s logistics indus...

Development of China’s logistics industry

The COVID-19 pandemic has only accelerated development of China’s logistics industry, which was already moving at breakneck speed. For decades, the country has been a crucial node in the supply chain of companies around the globe. And while many customers in other countries only awakened to the convenience of online shopping and delivery during the pandemic, millions of drivers have long been zipping through Chinese cities to deliver parcels of all sizes.


How has the Chinese logistics market fared during the pandemic, and what’s the outlook for 2022?

In this article, we present five insights global investors, logistics companies, and shippers should be aware of. Generally speaking, surging demand for logistics services coupled with supply chokeholds resulting from pandemic lockdowns and travel restrictions have translated into a profitable year for many logistics players. The COVID-19 pandemic also sped up the industry’s sophistication. While we see greater consolidation and integration in some subsectors such as third-party logistics and express-delivery carriers, we’re also expecting growth in other areas such as warehouse automation and air cargo.


1. Most logistics players are looking forward to another bumper year in 2022

If you’re a logistics provider, chances are 2021 was a profitable year. While the initial shock of the pandemic depressed freight volume growth in early 2020, the world recovered its appetite for more physical goods shortly thereafter. Increased savings from staying home more and government financial aid boosted people’s purchasing power for tangible products such as furniture—partly because they couldn’t spend this money on services like eating out, traveling, or getting their nails done. So as more people bought more products (many of them made in China) to upgrade their homes and convert their living spaces to offices, shipping volumes soared across all modes last year, including road freight, container, and air freight (Exhibit 1). In China, freight volumes have risen by between 1 and 14 percent since 2019 and were higher in some key trade lanes such as between the country and North America.



Even though demand soared through most of 2021, the supply of effective freight capacity struggled to keep up. Ports globally, and especially those on the US West Coast, became congested due to elevated import volumes. This, coupled with pandemic-imposed port lockdowns and the Suez Canal blockage, took capacity out of the market and sent shipping costs skyrocketing to unprecedented levels. Furthermore, fewer passenger flights coming in and out of China meant a reduction of belly cargo-carrying capacity. Between November 2020 and 2021, air freight rates between Hong Kong and Europe rose by 47 percent, from $5.40 to $7.90 per kilogram. All this translated to better profit margins for freight forwarders and increased returns for their shareholders (Exhibit 2). The average earnings (before taxes and interest) rose by 36 percent for forwarders, and even more so for carriers that owned ships and aircraft.



The same dynamics will probably continue into 2022, as supply chain challenges are unlikely to be resolved immediately. The emergence of Omicron and other potential coronavirus variants, along with China’s continuing zero-case policy, means that Chinese borders will remain largely closed. Container supply chain congestion and limited cargo-belly capacity should probably allow logistics suppliers to keep their high profit margins for 2022, which spells good news for their investors and shareholders.


2. The flurry of mergers among third-party logistics players will probably continue

Freight forwarders and third-party logistics (3PL) providers have been eagerly searching for ways to quench the seemingly insatiable thirst for their services. Many companies have sought to lock in longer-term capacity, expand their digital capabilities, and move toward omnichannel integration. The value of M&A activity, IPOs, and start-up deals in China shot up by more than $7 billion in 2021 compared with the previous year. The lines between freight forwarders and contract logistics providers are being increasingly blurred.


One of the most significant deals was the birth of a new Chinese logistics juggernaut in December 2021. The China Logistics Group, with a registered capital (the amount of capital that a company is allowed to get from selling shares) of $4.7 billion, was formed by a merger of five state-owned companies and is the country’s largest logistics player by revenue. By bringing together the former China Railway Materials Group, China National Materials Storage and Transportation, CTS International Logistics, China Logistics, and China National Packaging, the newly formed China Logistics Group directly owns 120 railway lines, 42 warehouses, and 4.95 million square meters of other storage facilities. It also has a fleet of three million vehicles across the world. 


Other examples of the broader trend of logistics players expanding their capacity include Cainiao buying a 15 percent stake in Air China Cargo last year and entering into long-term partnerships with LATAM Airlines Group and Atlas Air. Likewise, the express firm SF Holding bought a majority stake in Kerry Logistics, a $2.3 billion deal that would allow SF Holding to use Kerry Logistics as a platform for international business. SF Holding also added seven planes in 2021, bringing its total fleet size to 68 aircraft. 


Global companies have been looking to make bigger plays in the region too. The Danish shipping company Maersk bought LF Logistics, a Hong Kong-based contract logistics company, last December in a bid to shore up its omnichannel fulfillment capabilities in the Asia–Pacific region. 3 Earlier in the year, Kuehne+Nagel acquired Apex, a leading air freight forwarder in Asia, to offer “customers a compelling proposition in the competitive Asian logistics industry, especially in e-commerce fulfillment, hi-tech and e-mobility.” 


3. The express-delivery sector is beset by intense price competition

Once the bright spark in the Chinese logistics landscape, the express market has not fared so well during the pandemic. While the express market has continued its meteoric growth, expanding by 30 percent each year since the pandemic started, intense price competition has caused the average revenue per item delivered via express channels to drop by between 12 and 27 percent last year. It now costs $1.40 on average to send a parcel, which is much less than in the United States, where the average delivery cost is $9.


Many express players saw their margins shrivel to less than 5 percent (Exhibit 3), with some falling into unprofitability. While regulators have stepped in and introduced price floors as a temporary respite, we expect greater consolidation in the near future. In a market landscape where many logistics players are embracing omnichannel integration, not having direct control over assets can prove disadvantageous. A Chinese logistics solutions provider that was built on an asset-light business model struggled to effectively control operations at its suppliers’ outlets. Operational problems ensued and the company started to lose market share in the express-delivery sector. By the end of the year, the company announced it was selling its express-delivery business to a global company looking to make inroads in China.



Right now, the top eight express-delivery providers account for around 94 percent of the market share (Exhibit 4). ZTO Express has managed to hold on to its market lead by offering the lowest parcel unit prices and by having a network that reaches more than 98 percent of the country’s districts and counties.



The fierce price competition will probably continue to weaken the smaller players. We therefore see continued consolidation, with smaller logistics players being acquired by larger groups, such as domestic logistics players, international players, or e-commerce players looking to control their supply chains. If the international express market is any indication, greater consolidation could be more profitable for the players that remain. The top three companies in the international express-delivery market control around 90 percent of the market share and enjoy profit margins more than three times of those achieved by China’s domestic express providers.


4. Air-cargo demand is taking off, thanks to mass customization

Shifts in e-commerce patterns are fueling demand for air freight, an often underappreciated value driver in the logistics sector. Traditionally, e-commerce supply chains relied mostly on maritime shipping to transport products in bulk to destination countries in advance, before local express providers take over the final leg of the delivery to the end customer. This model is already—and will continue—shifting.


This shift is due to digital advances in e-commerce, which has empowered mass customization, especially in fast fashion. For example, Shein, one of China’s largest fast-fashion e-commerce retailers, uses data analytics to inform the production of a huge range of trendy apparel (150,000 separate items in 2020) at extremely low price points and small volumes. These items are then targeted and marketed to specific demographics around the world via social media. When customers buy a product, they get a sense that their purchase is personalized according to their specific preferences. While its manufacturing base is in China, Shein’s core markets are the United States, Europe, Australia, and the Middle East.


It’s more efficient to deliver such orders from the product supplier to the customer in what is termed the “direct line” model. This refers to transporting products in bulk via air freight to local postal companies in the final destination, empowering swift last-mile deliveries to the final customers. Before 2016, postal companies fulfilled the end-to-end deliveries of small parcels, which accounted for about 40 percent of China’s total outbound direct-to-customer market. But companies are increasingly turning to the direct-line delivery model. By being able to offer much lower prices than traditional express companies, e-commerce behemoths like Wish, Lazada, Shoppe, and Shein in China have catalyzed the prominence of the direct-line model.


Many Chinese companies including JD Logistics, Cainiao, SF Express, and YTO Express are actively growing their freighter fleets. This is a sign that the direct-line model is gradually replacing traditional postal and express delivery (Exhibit 5). Between 2016 and 2020, the demand for direct-line delivery has risen by 84 percent.



Tariffs in the European Union and the United Kingdom may dampen growth of the direct-line market especially for small-ticket items. Duties are now applied across all imports, and there is no longer a de minimis threshold. However, the United States—which is the largest recipient of China’s outbound e-commerce parcels—continues to have a high de minimis with no tariffs for goods below $800, and measures have been introduced to facilitate customs clearance. The new Universal Postal Union tariffs will cause many of China’s bilateral postal rates to rise, in turn hastening the shift from postal to the direct-line model. Furthermore, mass customization supports the supply chain logic of minimizing inventories.


As the direct-line model becomes more ubiquitous in e-commerce, we expect it to drive the growth of air-cargo demand in China and account for 33 percent of total outbound air cargo by 2025. Additionally, air cargo is also projected to increase from 1.3 million tons in 2020 to nearly 2.0 million tons by the middle of the decade. To cope with the startling surge in direct-line volumes, 15 additional freighter aircraft may need to be deployed from China every week.


5. Warehouse and omnichannel are the next frontiers of automation technology

Despite an abundance of labor at relatively low costs, China has one of the highest degrees of logistics automation, especially in e-commerce. But there is much potential that is still untapped in omnichannel integration and warehouse technology.


New consumption trends and expectations are raising new logistical challenges, such as the effective coordination and management of omnichannel fulfillment. Not only are logistics providers struggling to handle a vast range of SKUs, as shippers cater to the increasing diversity of customer preferences, they are also finding themselves with excessive inventory resulting from information silos between brands and channels. As online shopping normalizes, customers not only expect greater visibility but also the right to regret and return the products they buy, which means logistics providers have to shore up their reverse logistics capabilities.


As more retailers pursue the direct-line delivery model for international fulfillment, warehouse operations need updating. Digitizing the end-to-end delivery chain can also help ameliorate the financial reality of rising labor costs in China. Logistics companies operating in large cities face the additional challenge of limited real estate for large warehouses, which is controlled by local government. Investing in warehouse automation and other digitalization technologies could help them optimize the use of space and reduce unnecessary rental costs.


Two types of players can make the most impact in this space. The first are ecosystem platforms such as the Cainiao (which was spun off from Alibaba) and JD Logistics (which was launched by the Chinese e-tailer The second category includes pure logistics businesses such as Eternal Asia and Feima.


These players may invest in comprehensive transportation and warehouse management systems that leverage advanced-analytics capabilities to route orders intelligently and optimally. They could also enhance data collection and monitoring systems to provide more granular tracking of the stock levels across various channels in real time. Another area for development: the capability to process scattered orders, which are often small, more rapidly.


JD Logistics has invested heavily in warehouse automation. The company opened up an intelligent-logistics center in 2019 in China’s Guangdong Province that boasts a single-day processing capacity of 1.6 million orders, powered by a three-dimensional automation system that can organize more than 20 million units of medium-size goods at the same time. 


How should global investors, shippers, and logistics providers respond to these trends?

An awareness of the trends in the Chinese logistics landscape could help global investors, logistics providers, and shippers make more informed decisions regarding which areas to invest in, which Chinese market subsectors to enter, or how to plan for their supply chain.


Shippers. With China’s borders remaining highly constrained and belly capacity not returning in sufficient enough levels, it’ll be another tight year across supply chains. The risks of recurring COVID-19 outbreaks continue to threaten the supply of logistics services in air cargo, maritime shipping, and land-based deliveries. For shippers, diversifying suppliers and ports of export is a prudent solution. Some large shippers may consider expanding their ownership of logistics assets. We expect major e-commerce companies to buy air capacity and commit to long-term dedicated agreements for trucking.


Logistics providers. This will probably be another strong financial year, but one with significant operational challenges. Winners may be able to distinguish themselves by meeting their customers’ needs flexibly in times of constrained supply chains. Digitization and automation are critical, and logistics providers should double down their investments in these areas. We expect to see a rise in R&D investment into direct platforms with suppliers and with customers. While larger players may be able to manage this, smaller logistics players are at risk of being squeezed out. They might have to be extra entrepreneurial to seek out the financial backing they need (or the right kind of partnerships) to equip themselves with critical digital capabilities. Otherwise, they might find that the next best step would be to get their business ready for sale to clinch the best valuation.


Investors. 2022 presents a wide range of opportunities. For those that have previously bought logistics assets, 2022 could be a great year to sell to reap plump margins—many international and domestic logistics companies are on the lookout for consolidation opportunities in the market. There could also be select opportunities for investment. As mentioned earlier, smaller logistics players in the express market would likely be seeking financial support to digitalize their businesses.


The pandemic has ushered the Chinese logistics market into an interesting stage of its evolution. While the five trends outlined here take place within China’s borders, their implications are far-reaching and global. Whether it’s doubling down on omnichannel and warehouse innovation or reassessing their supply chain for direct-line deliveries, stakeholders familiar with these trends should be informed in their decision making as they look ahead in 2022.



Source: McKinsey Insight




China’s New Regulatory Requirements...

China’s New Regulatory Requirements for Imported Food Products

Makers of Irish whiskey, Belgian chocolate and European coffee brands are scrambling to comply with new Chinese food and beverage regulations, with many fearful their goods will be unable to enter the giant market as a Jan 1 deadline looms. On 12 April 2021, the General Administration of Customs of China (“GACC”) issued Order No. 248, which sets out new requirements for the registration of qualified foreign food producers that are allowed to export food products to China, effective from 1 January 2022. This Order represents a significant move toward tightening up the regulation of foreign made food products imported into China.



As the date of coming into force of the Order is fast approaching, one of the key challenges faced by foreign food producers is in ensuring that the registration process can be completed in a timely manner so that they have sufficient time to take transitional actions such as reprinting of product labels with the relevant registration number under the new scheme. But detailed procedures explaining how to get the required registration codes were only issued in October, while a website for companies allowed to self-register went online last month.


China's food imports have surged in recent years amid growing demand from a huge middle class. They were worth US$89 billion in 2019, according to a report by the United States Department of Agriculture, making China the world's sixth largest food importer.


China has tried to implement new rules covering food imports for years, triggering opposition from exporters. The General Administration of Customs of China (GACC), overseeing the latest iteration of the rules, has provided little explanation for why all foods, even those considered low-risk such as wine, flour and olive oil are covered by the requirements. Experts say it is an effort to better oversee the large volumes of food arriving at Chinese ports and place responsibility for food safety with manufacturers rather than the government.


Food, especially chilled and frozen food, has already faced severe delays clearing Customs in China in the last year due to coronavirus testing and disinfection measures


Foods including unroasted coffee beans, cooking oil, milled grains and nuts are among 14 new categories deemed high risk that were required to be registered by the end of October by food authorities of the exporting countries. Facilities making low-risk foods can register themselves on a website that launched in November.


We highlight below a number of areas that may warrant attention and specific consideration as businesses make necessary adjustments to comply with the Order:


1. The term “food products” for the purpose of Order is not clearly defined, although it expressly excludes food additives. Further scope clarification and discussion with GACC may be necessary.


2. An increasingly large share of food imports into China are now made through the cross-border e-commerce (“CBEC”) regime, which waives most licensing and registration requirements for ordinary imports. CBEC’s status as a trade “safe harbour” has already been challenged recently, as China is now subjecting Australia wines imported through CBEC to anti-dumping and countervailing duties resulting from a trade remedies action decided in December 2020.


3. There are concerns that the Order may give rise to non-trade barriers for imported food products. In fact, a number of countries including Australia, Europe, United States, Canada, South Korea and Japan have raised concerns at a WTO SPS Committee meeting in July 2021, stating that the new registration requirements may be overly onerous in expanding the scope of control beyond high-risk food products to cover a greater scope of imported food products.


4. In view of the evolving trade relationships involving China, there are also concerns that the Order may become a tool in the toolbox employed by the Chinese government to address geopolitical or trade tension, as the broad provisions and lack of detailed implementation rules could potential allow room for the exercise of discretion in the practical implementation of the Order. On the other hand, it would be interesting to observe how the Chinese government will balance the overall compliance regime for foreign food producers with American food producers covered under the Phase One Deal between China and the United States, which provides for higher transparency and certainty with respect to non-tariff trade barriers for U.S.-origin food and agriculture products, including the registration of U.S. factories listed by U.S. Food and Drug Administration (FDA) in its list of qualified producers forwarded to GACC.


5. Last but not least, notwithstanding the controversy surrounding the justifiability of the new Order under the multilateral or bilateral trade frameworks, the Chinese government is obviously looking to expand its scope of supervision over food supply chains to include operations outside of China. As a result, insofar as the Chinese market is concerned, the compliance strategy for multinational food suppliers should also address the China law compliance risks and challenges involved in such pre-importation operations.


Source: Reuters.

Navigating Asia’s B2B e-commerce surge

Navigating Asia’s B2B e-commerce surge

Asia may be leading the transformation in B2B e-commerce but there are still untapped opportunities.

If 2020 becomes known as the year e-commerce erupted, then Asia will be remembered as the epicentre of the transformation. In a region that was already emerging as the global hub for e-commerce in 2019 – the top seven countries for online consumer spending growth were all in Asia – the COVID-19 pandemic accelerated the pace.


Now, as broadband access widens, 5G networks mushroom and Asia’s middle-class population eclipses its global counterparts, that dominant position is only likely to strengthen. By the end of 2021, Asian e-commerce sales are forecast to reach USD3.5 trillion1, more than three times higher than those in North America, the second-largest region.



“The surprise has been the sheer pace at which this has happened,” said Mahesh Narayan, Global Product Lead – Mobile Money & E-Commerce at Standard Chartered. “E-commerce will continue to grow exponentially in Asia. It’s even starting to impact more traditional industries amid a shift in consumer habits, regulatory developments and innovations from banks and FinTech companies.”


Undoubtedly, the pandemic has accelerated progress. A Bain-Facebook survey found that 85 per cent of people in the region tried new apps for the first time, with e-commerce, food delivery and digital payments among the most popular categories. Online grocery sales in Southeast Asia grew nearly three times during the outbreak. The “Double Five” online shopping festival in Shanghai in May generated USD2.2 billion in orders in 24 hours. And sales during Alibaba’s annual Singles Day shopping event reached a record USD74 billion.


Despite the remarkable pace of transformation, there are still abundant untapped opportunities. According to a Bain & Co. study, three-quarters of micro, small and medium-sized enterprises in ASEAN see the potential of digital integration, but only 16 per cent are realising the full potential of technology. A Google-Temasek Holdings report meanwhile estimated that digital integration could deliver a USD1 trillion rise in the region’s GDP by 2025, while its internet economy alone could be worth USD240 billion by the same year.


Role of FI partners

As small and medium-sized businesses start digitising their lending operations, FIs are also expanding existing platforms with new services and technologies to address their needs.


“We're doing quite a few things in this space,” said Ankur Kanwar, Managing Director, Head of Cash Management, Singapore and ASEAN at Standard Chartered. “One is we're building a state-of-the -art single scalable payment engine. This is a global payment platform that supports both B2B and B2C domestic and cross border payments. We are also investing heavily in the e-commerce space and providing consistent and scalable solutions for online collections, escrow accounts, QR codes and real time direct debits.”


Standard Chartered partnered with Deutsche Post DHL Group to co-create a new online collections solution for their DHL Express Division that would allow their customers across Asia to make online payments in local currencies for shipping charges and duties & taxes, using local payment methods (including instant / QR payments, bank transfers, eWallets and cards). The solution is live across six countries and expanding.


We also supported them with digitisation of their in-store collections and payments on delivery using QR code and instant payments powered by our proprietary app and integration with the hand held devices of their couriers. This provided DHL with a cost effective solution, enabling elimination of cash in the last mile service, access to a variety of local payment methods across multiple geographies and automation of their reconciliation, all through a single integration and a single contract with Standard Chartered.


There are also opportunities for B2B e-commerce technologies to not only help B2B vendors migrate online, but to also optimise both the selling and purchasing process for business partners. Hence, a big area of focus is B2B payments because establishing payment terms or financing is fundamental to B2B e-commerce transactions.


Payments surge

B2B e-commerce revenues rose 20 per cent from the beginning of the crisis. Digital payments surged, both in advanced digital markets and traditionally cash-dominated countries. GCash in the Philippines, for instance, reported a 30 per cent increase in payments. SC Pay – Standard Chartered’s payment-processing engine – saw its share of fast payments in Hong Kong grow to 23 percent in the first half of 2020, from 10 per cent a year earlier. The buildout of SC Pay into a single global payments system will be complete in three years.


“One of our clients in Hong Kong is a telco,” Kanwar said. “Traditionally they had sent paper bills customers, which were both businesses and consumers. The customers would then make a payment through cheque or cash electronic payments. We helped them transform by printing a QR code on their paper bills. This enabled customers to simply scan the QR code and make an instant payment, cutting down on cash and cheques. In turn, that made the collections more efficient, cutting down the cycle time.”


Singapore mall operator CapitaLand introduced a new e-commerce platform featuring the wares of retailers whose shops had been forced to shut during lockdown. Other businesses used the crisis to develop new digital commercial collaborations. In Indonesia, e-commerce company Bukalapak teamed up with ride-hailing firms Grab and Gojek to run deliveries. Gojek partnered with Indonesia’s Agriculture Ministry to help local farmers and market vendors move their services online – and saw rice sales from partnership markets increase 30 per cent. Vietnamese e-commerce platform Sendo began partnering with overseas companies, including giants like Unilever and Proctor & Gamble, to expand the range of products available to local shoppers.


The way ahead

On the B2C front, there has already been a huge amount of innovation,” Kanwar said. “B2B has lagged because it’s more complicated. Going forward, B2B innovation is going to be on how do I digitise my entire supply chain? And how do I start interacting with my suppliers on the one side, as well as let's say distributors and consumers on the other side, completely through digital means.”


Moreover, progress is uneven across the region. While countries such as China, Singapore and Thailand have surged ahead in e-commerce, other parts of Asia remain underserved. Internet penetration is still low in countries such as Laos (43 per cent), Cambodia (50 per cent) and Myanmar (39 per cent), and many nations also lack the digital, regulatory and financial infrastructure to drive the growth seen elsewhere in the region. Furthermore, the immediate social and cultural expectations of B2B e-commerce users in some of these countries are not being met by existing technologies that have evolved from the West.


But with its extensive experience across Asian markets, Standard Chartered is developing solutions to overcome these obstacles. In India, for example, the bank has backed SOLV, a 360-degree B2B marketplace platform helping the country’s micro, small and medium enterprises (MSMEs) connect and do business with a large network of buyers and suppliers, build their credit scores, source working capital finance and access business services such as logistics.


As lockdowns threatened to cripple businesses, SOLV drew on its network of manufacturers and delivery channels to get essential goods to small village shops, resident welfare societies, NGOs and small hospitals, providing supplies to thousands of families through the SMEs on the platform.  The SOLV adoption rate grew threefold during the first four months of the crisis, signalling both a rising affinity for digital platforms and a greater awareness of the need to build future resilience.


“While the broad trend is digitisation for every market, the underlying solutions that are being built are very country specific,” Kanwar said. “That's where banks like Standard Chartered are trying to take the lead. We’re not only investing in all of these technologies across the region, we’re also trying to make sure that from our corporate client perspective, we present a standardised set of solutions and use cases no matter which country they deal with.”



Source: Bloomberg Media Studios in partnership with Standard Chartered.

AliExpress coming to a mobile near ...

AliExpress coming to a mobile near you

AliExpress is Alibaba’s cross-border e-commerce platform, which facilitates trade and brings sellers and buyers together. AliExpress does not sell directly, but provides a platform for safe transactions between sellers and buyers. AliExpress was founded in 2010, and is today one of the top cross-border B2C platforms. Alibaba’s mission is to make it easy to do business anywhere. AliExpress not just serves consumers from all over the world (it is currently available in: Russian, Portuguese, Spanish, French, German, Italian, Dutch, Turkish, Japanese, Korean, Thai, Vietnamese, Arabic, Hebrew, Polish) but also enables small and medium-sized businesses to grow locally and globally.



AliExpress is available to ship in more than 200 countries and regions, and recently launched their selling program to include overseas sellers, limited to some countries: from Italy, Spain, Russia and Turkey.  AliExpress was previously only open for Chinese sellers accessing international consumers. Now, they are exploring a change to their business model by opening its marketplace to non-Chinese sellers, which means they will be better positioned to compete against Amazon and leverage AliExpress as a platform to sell their products.



Leveraging Alibaba Group’s technology and expertise in commerce, AliExpress has built infrastructure to provide the best experience for consumers and sellers, including four key components – a well-established platform, localized payment options, an efficient logistics network through local partnerships and a money back guarantee if the item you received is not as described, or if the item is not delivered within the Buyer Protection period.



AliExpress have been offering a livestreaming service for more than 1 year, and the penetration keeps increasing. They have quite a few merchants who have enjoyed a better result via livestreaming. In China this has been growing year on year, and is now estimated to account for about 9 percent of total e-commerce sales in China. Brands use livestreaming, broadcasting in real-time, as a tool to promote products and engage better with their potential customers.



They have also launched a brand new platform called AliExpress Connect, which is designed to create opportunity for both brands and influencers: as the world moves increasingly toward online shopping. It offers new income sources and job opportunities for influencers and content creators, helping them to scale and digitalize their business. While for brands, it opens up the opportunity to attract new customers. Anybody interested in joining the program, you could email to the following: or go directly to:



Whilst their website is not as user friendly as Amazon’s they are positioning themselves to better positioned in developing e-commerce markets to compete against Amazon.

China’s Belt and Road Initiative:...

China’s Belt and Road Initiative: Heightened Debt Risks to Countries

The following article is reproduced here in it's entiety from the Center for Global Development


China’s Belt and Road Initiative – which plans to invest as much as $8 trillion in infrastructure projects across Europe, Africa, and Asia – raises serious concerns about sovereign debt sustainability in eight countries it funds, according to a new study from the Center for Global Development.



The study evaluated the current and future debt levels of the 68 countries hosting BRI-funded projects. It found that of the 23 countries that are at risk of debt distress today, in eight of those countries, future BRI-related financing will significantly add to the risk of debt distress. You can see the full list of countries, their external debt levels, and China’s portion of that debt in the new study here.



“Belt and Road provides something that countries desperately want – financing for infrastructure,” said John Hurley, a visiting fellow at the Center for Global Development and a coauthor of the study. “But when it comes to this type of lending, there can be too much of a good thing.”



According to the study, China’s track record managing debt distress has been problematic, and unlike the world’s other leading government creditors, China has not signed on to a binding set of rules of the road when it comes to avoiding unsustainable lending and addressing debt problems when they arise.



“Our research makes clear that China needs to adopt standards and improve its debt practices – and soon,” said Scott Morris, a senior fellow at the Center for Global Development and a coauthor of the paper.



The study recommends that China:

  • Multilateralize the Belt and Road Initiative: Currently, the multilateral development institutions like the World Bank are lending their reputations to the broader initiative while only seeking to obtain operational standards that will apply to a very narrow slice of BRI projects: those financed by the MDBs themselves. Before going further, the MDBs should work toward a more detailed agreement with the Chinese government when it comes to the lending standards that will apply to any BRI project, no matter the lender.


  • Consider additional mechanisms to agree to lending standards: Some methods might include a post-Paris Club approach to collective creditor action, implementing a China-led G-20 sustainable financing agenda, and using China’s aid dollars to mitigate risks of default.



In all eight highest risk countries, the proportion of external debt that is owed to China and its banks will rise, sometimes dramatically, under the Belt and Road Initiative:



  • Pakistan: Pakistan, by far the largest country at high risk, currently projects an estimated $62 billion in additional debt, with China reportedly financing roughly 80 percent of that. Big-ticket BRI projects and the relatively high interest rates being charged by China add to Pakistan’s risk of debt distress.



  • Djibouti: The most recent IMF assessment stresses the extremely risky nature of Djibouti’s borrowing program, noting that in just two years, public external debt has increased from 50 to 85 percent of GDP, the highest of any low-income country. Much of the debt consists of government-guaranteed public enterprise debt and is owed to China Exim Bank.



  • Maldives: China is heavily involved in the Maldives’ three most prominent investment projects: an upgrade of the international airport costing around US$830 million, the development of a new population center and bridge near the airport costing around US$400 million, and the relocation of the major port (no cost estimate). The country is considered by the World Bank and the IMF to be at a high risk of debt distress and is currently being buffeted by domestic political turmoil.



  • Lao, P.D.R. (Laos): Laos, one of the poorest countries in Southeast Asia, has several BRI-linked projects. The largest, a $6.7 billion China-Laos railway, represents almost half the country’s GDP, which led the IMF to warn that the project might threaten the country’s ability to service its debts.



  • Mongolia: Mongolia’s future economic prosperity depends on major infrastructure investments. Recognizing Mongolia’s difficult situation, China Exim Bank agreed in early 2017 to provide financing under its US$1 billion line of credit at concessional rates for a hydropower project and a highway project. If reports of an additional $30 billion in credit for BRI-related projects over the next five to ten years are true, then the prospect of a Mongolia default is extremely high, regardless of the concessional nature of the financing.



  • Montenegro: The World Bank estimates that public debt as a share of GDP will climb to a whopping 83 percent in 2018. The source of the problem is one very large infrastructure project, a motorway linking the port of Bar with Serbia that would integrate the Montenegrin transport network with other Baltic countries. The Montenegro authorities concluded an agreement with China Exim Bank in 2014 to finance 85 percent of the estimated US$1 billion cost for the first phase of the project, with the second and third phases likely to lead to default if financing is not provided on highly concessional terms.



  • Tajikistan: One of the poorest countries in Asia, Tajikistan is already assessed by the IMF and World Bank to be at “high risk” of debt distress. Despite this, it is planning to increase its external debt to pay for infrastructure investments in the power and transportation sectors. Debt to China, Tajikistan’s single largest creditor, accounts for almost 80 percent of the total increase in Tajikistan’s external debt over the 2007-2016 period.



  • Kyrgyzstan: Kyrgyzstan is a relatively poor country with significant new BRI-related infrastructure projects, much of it financed by external debt. China Exim Bank is the largest single creditor, with reported loans by the end of 2016 totaling US$1.5 billion, or roughly 40 percent of the country's total external debt. While currently considered to be at a “moderate” risk of debt distress, Kyrgyzstan remains vulnerable.



The full study, “Examining the Debt Implications of the Belt and Road Initiative from a Policy Perspective” can be found at:

Guangdong-Hong Kong-Macao Greater Ba...

Guangdong-Hong Kong-Macao Greater Bay Area

Located in the Pearl River Delta of South China, the Guangdong-Hong Kong and Macao Greater Bay Area is an agglomeration of cities and special administrative regions which serve as a must path for the routes leading to countries along the Belt and Road. The area is adjacent to the Beibu Gulf Economic Zone, southeast Asia and the vast central China urban agglomeration as well. It is a major international land and maritime corridor linking the hinterland of China and facing the ASEAN countries.



The Guangdong-Hong Kong and Macao Greater Bay Area comprises cities of “9+2”, that is Guangzhou, Foshan, Zhaoqing, Shenzhen, Dongguan, Huizhou, Zhuhai, Zhongshan and Jiangmen as well as two SARs of Hong Kong and Macao. Yet the positioning of each city is different.




City or SAR VS Development Goal

Hong Kong  --    global financial center and logistics center

Shenzhen    --    international innovation service center

Guangzhou  --    three international strategic hubs

Dongguan   --     international manufacturing service center

Foshan        --     international industrial manufacturing center

Zhuhai        --     expanding bridgehead and the innovation plateau

Zhongshan  --     state-level advanced manufacturing base

Macao         --     world tourism leisure center

Huizhou      --      ecological tour of "green city", taking ecological responsibility of the Greater Bay Area

Jiangmen    --      state-level advanced manufacturing base

Zhaoqing     --      agglomeration area of upgrading traditional industries



Supported by advanced manufacturing, modern service and leading emerging industries, the area is positioned to become the world's innovation and development highlands, the most dynamic area in the world’s economy, the world famous high-quality living quarters, the world civilization exchange and mutual learning place and the demonstration zone of deepening reform in the country.



The Guangdong-Hong Kong-Macao Greater Bay Area is most likely to become a vital giant portal for the Belt and Road, for that the area is a geographical node closest to the market along the route among all the urban agglomerations in China, with the most convenient infrastructure, developed supply chain network and domestically leading position in electronics, construction, energy, finance, telecommunications etc.



Additionally compared with other domestic areas, the area is in a relatively high position in the international value chain, especially considering two free ports of Hong Kong and Macao and Free Trade Zone (Guangdong) including Qianhai, Nansha and Hengqin. For a long time ahead, the development of the Guangdong-Hong Kong-Macao Greater Bay Area is expected to be an important regional development priority in China. It is likely that four sorts of investment opportunities may be produced.



The first is connection of traffic infrastructure. Generally, the improvement of traffic technology facilities is the basis for free flow of resource elements. As the main direction of traffic construction in the area is building of cross-border transport infrastructure and improvement of the comprehensive transportation network connecting Hong Kong, Macao and the Chinese mainland, investors shall attach importance to the potential investment opportunities hidden in traffic infrastructure-related projects and programs.



The second sort of investment opportunities lies in construction of ports and shipping center. The Guangdong-Hong Kong-Macao Greater Bay Area is the key area of opening-up for the 21st Century Maritime Silk Road and Hong Kong is an international hub and shipping center. In the future, overall shipping routes planning, customs clearance facilitation level among the Chinese mainland, Hong Kong and Macao and cooperation strengthening between ports in the Pan-Pearl River Delta region are highly expectable thus investors are suggested seeking fortune in this regard.



The third may be found in regional function remolding and industrial gathering in the area. Investors are expected to explore the opportunities in the functional transformation of the area and the integration of resources brought about industrial agglomeration and industrial upgrading.



Lastly opportunities exists in upgrading of industrial cooperation. The Guangdong-Hong Kong-Macao Greater Bay Area represents a coordinated development mode after development of more monomer cities matures. Enterprises from the Chinese mainland, Hong Kong and Macao shall thus make mutual investment to jointly “go out”. Other investment opportunities may arise from the expansion of two-way flow of Renminbi, Hong Kong-centered science and technology exchanges and cooperation, intellectual property rights trade, and exhibition, commerce and traditional Chinese medicines with Macao.



One Belt, One Road: A bridge to the...

One Belt, One Road: A bridge to the world

The much spoken of ‘One Belt, One Road’ (OBOR) initiative, launched in 2013, is fast coming to fruition. In this piece we take a look at the major new routes of global trade.



The five major goals of the Belt and Road Initiative are: policy coordination, facilities connectivity, unimpeded trade, financial integration, and people-to-people bonds.



The Belt is an adaptation of China’s historic Silk Road, a land-based trade route linking East and West. In its modern incarnation, a land-based Silk Road Economic Belt starts at China’s Luoyang and ends at Port of Hamburg in Germany. It ties in with a maritime Silk ‘Road’, focusing on Chinese coastal ports, that begins at China’s Quanzhou and ends in Rotterdam in the Netherlands.



Export agencies in over 60 countries now support OBOR. This encompasses two-thirds of the world’s population with six clear channels to different markets:



(1) The Eurasia Land Bridge Economic Corridor – an international railway line running from Lianyungang in China’s Jiangsu province, through Alashankou in Xinjiang to Rotterdam in Holland. These new rail routes offer freight transport, as well as the convenience of ‘one declaration, one inspection, one cargo release’ for any cargo transported.



(2) The China-Mongolia-Russia Economic Corridor – the three heads of state agreed to bring together the building of China’s Silk Road Economic Belt, the renovation of Russia’s Eurasia Land Bridge and the proposed development of Mongolia’s Steppe Road. This will strengthen rail and highway connectivity and construction, advance customs clearance, promote cross-national cooperation, and help establish the China-Russia-Mongolia Economic Corridor.



(3) China-Central Asia-West Asia Economic Corridor – this runs from Xinjiang in China and exits the country to join the railway networks of Central Asia and West Asia and reaches the Mediterranean coast and the Arabian Peninsula.



(4) China-Indochina Peninsula Economic Corridor – this corridor will deepen the relations between China and the five countries in the Indochina Peninsula.



(5) China-Pakistan Economic Corridor – the two countries will proactively advance joint projects, including highways, a new international airport, a new economic zone, and the China-Pakistan cross-national optic fibre network.



(6) Bangladesh-China-India-Myanmar Economic Corridor - OBOR could be the bridge that restores relevance for both Britain and Europe to China; it will keep Britain in the European fold post-Brexit. Following the financial crash in 2007/08 the changes in world trade that had been developing were revealed. East to South and South/South trading patterns took predominance in driving the world economy and the old West to East paradigm was shattered.



China Cold Chain Logistics Outlook 2016

China Cold Chain Logistics Outlook 2016

China’s cold chain logistics industry, which now enjoys special status under the Chinese government’s macro economic control policy, will continue to strengthen and improve, while maintaining rapid operational growth. The industry was chosen as a favored industry because of its importance in maintaining public health and food security. At the same time, disposable incomes in China are rising, and food safety is becoming more of a concern for individual consumers.



According to recent studies conducted by the International Cold Storage Association, only 15% of products requiring temperature control were handled correctly in China, and only 10% of vehicles that are used for perishable products are equipped with cold storage equipment, not just ice cubes or ice bricks. Most of the logistics systems do not have any temperature control at all. As a result, more than 30% of the agricultural products produced in China are wasted during transportation. Due to lack of proper handling, product quality of the remaining 70% is in question. Food safety is becoming more of a concern for consumers and a complete system for cold chain logistics is in demand.



In 2015, meat production in China exceeded 80 million tons, vegetable 700 million tons, fruit 260 million tons, dairy products 27 million tons and seafood 60 million tons. Besides, large amounts of meat and frozen food are produced every year in China too. Temperature fluctuation in cold storage and transport is one of the main reasons for food quality decline. To ensure those perishable foods' freshness and quality, cold chain logistics is needed.



At the end of 2014, China had a freezer capacity of about 120 million cubic meters and less than 60, 00 refrigerator vehicles, lagging far behind developed countries in per capital terms.





As a high-end sub-industry of logistics, cold chain logistics will become the focus of many investors in the next few years. As e-business develops in China, e-business enterprises operating fresh food are springing up and the supporting cold chain infrastructure. Many e-business companies in China have got into the field of fresh food, for example, large e-business enterprises like Tmall and JD have published their own fresh food strategy. Besides, logistics enterprises like SF Best of SF Express are conducting e-business and a bunch of professional fresh food e-business enterprises like Too Too Organic Farm are developing fast too. According to CRI's estimation, the market size of fresh food e-business was about CNY 100-120 billion and CAGR during the period of 2016-2020 will exceed 50%.



Currently fresh food e-busines companies hardly invest in cold chain equipment but they indirectly force the construction of cold chain distribution networks.  Enterprises such as JD and Tmall are still weak in cold chain warehouse, logistics delivery system and door to door delivery where they mainly cooperate with a third party cold chain logistics companies.



The cold chain logistics network can be divided into two parts: cold chain home delivery and cold chain artery, the former belonging to express and less-than-carload logistics while the latter involving supply chain management and third party logistics. Cold chain logistics is a sub-industry of logistics, with the largest potential market despite its complex operation and high barrier to entry. Cold chain logistics will be one of the fastes growing sub-industries of logistics in China in the next few years.



With  sustained consumer growth, a fast increase in demand for food, drugs and cosmetics: the cold chain logistics industry in China will undergo a transformation enableling investment opportunities in China for cold chain equipment manufacturers and cold chain logistics enterprises.




47 qualified companies  currently vie in the competition for refrigerated trucks. Among the top players including CIMC (Shandong), Zhengzhou Hongyu, Henan Bingxiong, Henan Frestec, Zhenjiang Speed Auto and KF Mobile, CIMC (Shandong) occupies the Shandong market, and seizes market share in Guangdong, Zhejiang, Hubei and other places; Henan Bingxiong performs outstandingly in Northeast China, Shanxi and Inner Mongolia; Zhenjiang Speed Auto and KF Mobile focus on East China and dominate the East refrigerated truck market. Zhengzhou Hongyu not only takes a favorable position via giants such as Shuanghui, Yurun, Topin, Sanquan and Synear in Henan, but also makes some achievements in Beijing, Hebei, Ningxia, Jiangsu and other markets.





Supply Chain Leaders: YTO Express.

Supply Chain Leaders: YTO Express.


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.




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.



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, 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, 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, the company did report in advance of going public last September that the value of goods purchased on 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 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. 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 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 also has sections that highlight suppliers Alibaba has authenticated, such as those from Chile and Peru, to increase consumer confidence in shopping on 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 highlighting merchants from Mexico, Colombia, Brazil and Argentina.


Global Customs Issues - China and the...

Global Customs Issues - China and the EU and the US Perspectives

Customs in China - The Facts

China Customs (the GACC) is a government agency that supervises and manages all arrivals in and departures from the customs territory of the People's Republic of China. It exercises a centralized management structure. It’s essential tasks are customs control, revenue collection, fighting smuggling and foreign trade statistics compilation. It shoulders such major responsibilities as duty collection, customs control, supervision and management of bonded operations, foreign trade statistics compilation, audit-based control, customs intellectual property rights protection, fighting smuggling, and port management.


Customs Valuation of goods entering into the European Union

Imports into any of the 28 countries of the European Union (EU) may attract a number of import taxes such as VAT, duty or anti-dumping duty. When due, it is important that the correct amount of these taxes is paid as the customs authorities in all EU countries have the power to impose various financial penalties against you, or even seize your goods. The question therefore is - how should importers calculate the value of the goods to ensure they do not fall foul of these penalties but also ensure they do not pay too much tax?


Dramatically and Legally Reducing Landed Costs for Your Exports in Multi-Tiered U.S./EU Import Transactions: The First Sale Rule

The “First Sale” rule is a collaborative and proper legal process available to U.S. and EU importers and global exporters to substantially reduce duties and taxes.  This rule has been the law of the land in the U.S. since Sandler, Travis & Rosenberg, PA (“ST&R”), won the seminal case establishing first sale as a viable option for valuation of merchandise in 1988.  ST&R has also successfully applied it to save significant duties for US and EU imports from over 512 global vendors.

Simply stated, the First Sale rule can be applied when there are two or more sales that give rise to an importation of merchandise. As long as all the rules substantiating first sale are met and documentation is established, the basis for dutiable value can be the first sale between the factory and the middleman/vendor, rather than the middleman/vendor and the importer.


To read the full articke form Klako Group please click here.

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