Consumer Prices Remain Steady in China

CPI - July 2015

China’s Consumer Price Index has been increasing marginally over the last here months, but the movement is within a very narrow range. The high of 102 last August verses the low in January of 100.8 is a range without a significant difference, which indicates no serious inflation or deflation in the economy.  The steadiness of the market basket stands in contrast to the tumult in equity markets. Sources: Tradingeconomics.com; National Bureau of Statistics China.

Coca-Cola Was the First

Coca-cola china

Coca-Cola was the first Western brand to enter China after the country opened its market to the world.  Its long experience provides lessons for building any business there.  Here are five principles that can be applied to any business trying to establish itself in the Chinese market.

  1. Advantage goes the first to establish a position in a category
  2. There is value in being viewed as a global brand
  3. Forming strategic partnerships will help bring your product to scale quickly
  4. Place production in China to show you want to be part of the country and to lower distribution costs
  5. Operate your company in a manner that benefits China

Source: InsideRetail Asia

Coca-Cola Was the First

Coca-cola china

Coca-Cola was the first Western brand to enter China after the country opened its market to the world.  Its long experience provides lessons for building any business there.  Here are five principles that can be applied to any business trying to establish itself in the Chinese market.

  1. Advantage goes the first to establish a position in a category
  2. There is value in being viewed as a global brand
  3. Forming strategic partnerships will help bring your product to scale quickly
  4. Place production in China to show you want to be part of the country and to lower distribution costs
  5. Operate your company in a manner that benefits China

Source: InsideRetail Asia

China’s National People’s Congress Meets, Adjusts

NPC

China’s National People’s Congress (NPC) meets twice a year to set and re-set the direction for the country.  The sessions are called Lianghui.  The latest meeting yielded four guidelines.

Made in China

In an effort to improve the image and reality of the Chinese manufacturing sector the government plans to provide a framework that will support the creation of “manufacturing innovation centers” that are intended to raise manufacturing standards and practices to higher levels.  They will also enforce stronger intellectual property rights in support of the innovation.

Maker Culture

In order to overcome the stereotype of Chinese people as “cheap copycats” the government will invest in innovation houses in Beijing and Shanghai and in a large production center at the engineering school at Tsinghua University.  The purpose will be to create products not merely manufacture them.

 

Anti-corruption

The government’s anti-corruption policies are coming from the top, Xi Jinping, president of China and Communist Party chief.  The policy has been a disruptive element in the society.  To start with, lavish gifts to government officials and business leaders are of the past.  Result:  Industries such as gaming, luxury products and exotic travel have seen a drop off.

5-Year Plan

Adjustments have been made to the five-year plan. They include relaxation of the fixed exchange rate, removal of specific tariffs and a reduction of the restrictions on foreign investment.

Employment goals have been set to limit unemployment to 4.5% by adding 10 million new urban jobs.  An increase of 10% for the military will help reach that goal.

Finally, the government is pushing green. They propose reducing energy consumption by 3.1% partly by bringing coal consumption to zero-growth through negative incentives: “green taxes” and “green tariffs.”  Source: China Skinny

China’s National People’s Congress Meets, Adjusts

NPC

China’s National People’s Congress (NPC) meets twice a year to set and re-set the direction for the country.  The sessions are called Lianghui.  The latest meeting yielded four guidelines.

Made in China

In an effort to improve the image and reality of the Chinese manufacturing sector the government plans to provide a framework that will support the creation of “manufacturing innovation centers” that are intended to raise manufacturing standards and practices to higher levels.  They will also enforce stronger intellectual property rights in support of the innovation.

Maker Culture

In order to overcome the stereotype of Chinese people as “cheap copycats” the government will invest in innovation houses in Beijing and Shanghai and in a large production center at the engineering school at Tsinghua University.  The purpose will be to create products not merely manufacture them.

Anti-corruption

The government’s anti-corruption policies are coming from the top, Xi Jinping, president of China and Communist Party chief.  The policy has been a disruptive element in the society.  To start with, lavish gifts to government officials and business leaders are of the past.  Result:  Industries such as gaming, luxury products and exotic travel have seen a drop off.

5-Year Plan

Adjustments have been made to the five-year plan. They include relaxation of the fixed exchange rate, removal of specific tariffs and a reduction of the restrictions on foreign investment.

Employment goals have been set to limit unemployment to 4.5% by adding 10 million new urban jobs.  An increase of 10% for the military will help reach that goal.

Finally, the government is pushing green. They propose reducing energy consumption by 3.1% partly by bringing coal consumption to zero-growth through negative incentives: “green taxes” and “green tariffs.”  Source: China Skinny

Turn of Fortunes

Mercedes R-class

In a sparkling turn of fortunes a factory in Mishawaka, IN is back in business making Mercedes Benz S.U.V.s for the Chinese market.  The plant that used to make Humvees for GM before it was closed in 2009, has its lights on again because the world is changing.  The oldest U.A.W. local is back in business producing 70 to 100 vehicles a day, all of which are shipped to China.

Mecedes R-class S.U.V.s where discontinued in the US because of poor sales performance, but the model has been a hit in China.  When production got squeezed at Mercedes’ Alabama plant a search led to the near dormant Indiana plant.  A company spokesman said It would have been too expensive to move the whole operation to China.  Source: New York Times

Turn of Fortunes

Mercedes R-class

In a sparkling turn of fortunes a factory in Mishawaka, IN is back in business making Mercedes Benz S.U.V.s for the Chinese market.  The plant that used to make Humvees for GM before it was closed in 2009, has its lights on again because the world is changing.  The oldest U.A.W. local is back in business producing 70 to 100 vehicles a day, all of which are shipped to China.

Mecedes R-class S.U.V.s where discontinued in the US because of poor sales performance, but the model has been a hit in China.  When production got squeezed at Mercedes’ Alabama plant a search led to the near dormant Indiana plant.  A company spokesman said It would have been too expensive to move the whole operation to China.  Source: New York Times

700 Million+ Subscribers!

Carrier Data - July 2015

The replacement trend continues unabated as Chona’s total smartphone subscriber base grew by more than 21,000,000 or 3/1% in July.  It is one of those indicators that sit in contrast to the stories about a slowing economy.  The folks switching from feature phones to smart are committed middle class people who are spending money.  While the economy is slowing, it still remains the fastest growing modern economy in the world.

Notable is the damage being done to China Unicom, which has lost almost 11 million subscribers over the last six months.  During the same period China Mobile grew by more than 10 million subscribers and China Telecom grew by another 5.9 million.  China Unicom is not managing the transition to smartphones very well.  Sources: China Mobile, China Unicom, China Telecom

700 Million+ Smartphone Subscribers!

Carrier Data - July 2015

The replacement trend continues unabated as China’s total smartphone subscriber base grew by more than 21,000,000 or 3/1% in July.  It is one of those indicators that sit in contrast to the stories about a slowing economy.  The folks switching from feature phones to smart are committed middle class people who are spending money.  While the economy is slowing, it still remains the fastest growing modern economy in the world.

Notable is the damage being done to China Unicom, which has lost almost 11 million subscribers over the last six months.  During the same period China Mobile grew by more than 10 million subscribers and China Telecom grew by another 5.9 million.  China Unicom is not managing the transition to smartphones very well.  Sources: China Mobile, China Unicom, China Telecom

 

Alibaba Moves to Block Competitor JD.com

Alibaba-JD

In its effort to protect its dominant e-commerce position in China, Alibaba has signed 20 major apparel brands to exclusive Tmall deals in a power play that blocks their major competitor JD.com. Two of the known exclusives are with Zara and Timberland.  In addition, the company is deepening its relationships with another 160 brands including Adidas and Gap.

The strategy has a second value to Tmall.  In a marketplace that is rife with knockoff products, these exclusive arrangements assure Chinese consumers they are getting genuine products.

In a second move intended to blunt JD.com, Alibaba has invested $4.6 billion in Suning Commerce, a bricks and mortar electronics retailer.  They aren’t interested in the stores; rather it is Suning’s logistics network, which is said to cover nine-tenths of China’s counties. The idea is to neutralize the logistics advantage that JD.com has had.

JD.com is not standing still.  It announced non-exclusive deals with Converse and Samsonite, among others. Source: Reuters