Connect with us
//pagead2.googlesyndication.com/pagead/js/adsbygoogle.js (adsbygoogle = window.adsbygoogle || []).push({});

China

5 things we can learn from China’s e-commerce explosion

Online marketplace Alibaba saw sales growth of 39% in comparison with the event in 2016, suggesting that Chinese consumers are confident in their spending

Published

on

China’s e-commerce market continues to see high double-digit growth year on year. The Double 11 event on 11 November 2017 – also known as Singles’ Day, when single people in China celebrate, and which has become a popular shopping holiday – was a clear example of how China’s consumption-led economy is evolving digitally.

Online marketplace Alibaba saw sales growth of 39% in comparison with the event in 2016, suggesting that Chinese consumers are confident in their spending and that consumption will continue to rise.

China: a booming market

China’s economy continues to grow steadily as it ended 2017 with GDP at 6.8%, according to China’s National Bureau of Statistics (NBS). In line with this positive momentum, at Nielsen we saw China’s consumer confidence index (CCI) reach a historic high of 114 points in both the third and fourth quarters of 2017, up two points from the second quarter of 2017 and six points from 108 in the fourth quarter of 2016.

CCI scores above and below 100 points represent, respectively, positive and negative consumer confidence. An all-time high CCI, coupled with healthy disposable income growth of 7.5%, as reported by the NBS, means that consumers are confident and consumer demand or consumption is expected to remain steady.

We see consumption increasing as consumers in China spend more than ever: 43% more compared with five years ago. That’s leagues ahead of the 24% growth in the US and 33% globally.

Nielsen’s e-commerce tracking data, within 34 fast-moving consumer goods categories, shows that in a 12-month rolling average leading up to November 2017, online sales grew 27% versus the year before, whereas offline sales increased only 6% over the same period.

Meanwhile, the ratio of enterprises with e-commerce services increased significantly in the last year. According to Nielsen’s CCI report, up to Dec 2016, the ratio of enterprises launching online sales reached higher than 45%.

There’s no doubt that China’s e-commerce market is on an overall upward trajectory. In line with this, Nielsen has identified five key trends that we believe are driving the development of the market, and which will be essential for businesses to leverage to ensure success in 2018.

Five key trends driving China’s e-commerce market

1) E-commerce shopping festivals

E-tailers are creating more shopping festivals and themes to unlock consumer desire. Based on Nielsen’s survey, before Double 11 this year, 79% of consumers said they planned to participate in Double 11. Alibaba saw 168 billion RMB in sales and 39% growth on Singles’ Day, while another main competitor, JD.com, achieved RMB 127 billion during 1-11 November, with over 50% growth.

Double 11 and similar shopping festivals are an opportunity for local brands, but these are also key opportunities for foreign brands to leverage the collective enthusiasm for shopping among Chinese consumers. On these holidays, consumers are looking to experiment, try new things and buy products that may be new to them. These festivals are a perfect opportunity for new brands entering the market to get noticed.

2) Consumption upgrade

Two triggers are sparking a trend known as “consumption upgrade”. Rising disposable income means that consumers are more confident in spending their money on a number of categories – especially food, cosmetics and clothing. An emphasis on quality and fashion are growing much faster than other consumer demands. Following this, middle- to upper-class consumers are now increasing their demand for goods that are not available domestically. Online platforms, where international high-end and niche brands are easily accessed, are rising in popularity, while cross-border shopping sites are leading the consumption upgrade movement.

According to Nielsen’s online shopper trend report, the proportion of consumers who had recently made a cross-border…

Source link

China

China props up state-owned developer Vanke as property crisis deepens

Published

on

China has asked 12 banks to provide financing to the beleaguered state-owned real estate firm, Vanke Group, just days after the housing and urban-rural development ministry vowed to let insolvent property developers go bankrupt.

The Chinese government’s support bucks its recent trend of letting indebted developers take their own downward course, which has compounded a spiraling crisis in the sector, once a major economic growth driver. 

Privately-held Evergrande Group and Country Garden Holdings were left to their own devices as their debts soared, leaving their creditors and homebuyers high and dry in trying to recover investments. The Hong Kong High Court issued a liquidation order for Evergrande in January. A similar fate looms for Country Garden which received a liquidation petition from one of its creditors in Hong Kong. Both companies are listed in Hong Kong.

In contrast, rescue efforts for Vanke, part-owned by the Shenzhen government, are being coordinated by the State Council, China’s cabinet amid Chinese President Xi Jinping’s policy of advancing state enterprises and a retreat of the private sector. 

The State Council has requested financial institutions to make swift progress and called on creditors to consider private debt maturity extension, according to a Reuters report on Monday, citing unnamed sources. 

Separately, the state-owned Cailian Press reported that the 12 institutions are expected to raise as much as 80 billion yuan (US$11.1 billion) for Vanke. But the report cited sources saying that the attitude maintained by each bank was conservative.

Shaky ground

Nonetheless, Vanke is likely to stay on shaky ground among investors after rating agency Moody’s lowered its credit rating to “junk.” 

“The rating actions reflect Moody’s expectation that China Vanke’s credit metrics, financial flexibility and liquidity buffer will weaken over the next 12-18 months because of its declining contracted sales and the rising uncertainties over its access to funding amid the prolonged property market downturn in China,” said Kaven Tsang, a Moody’s senior vice president in a statement this week.

The rating agency said it has placed all the ratings on review for downgrade, as it saw the company’s ability to recover sales, improve funding access, and maintain an adequate liquidity buffer to be worrying.

The government’s bid to save Vanke has aroused discussion online. Some netizens questioned the discrepancy between saving Vanke and abandoning Evergrande, while others worried that saving Vanke would reduce national resources at a time when the economy is growing at its slowest pace since 1990. There are also many posts rationalizing the government’s efforts to support Vanke.

A Vanke sign is seen above workers working at the construction site of a residential building in Dalian, Liaoning province, China September 16, 2019. (Stringer/File Photo/Reuters)

The blogger “Wuxinxinshuofang” believes that propping up Vanke is to ensure that the “hunt” for foreign capital won’t be disrupted by a Vanke-triggered real estate crisis. 

“The collapse of Vanke will bring about the debt crisis and liquidity crisis of all real estate companies. Efforts so far to prop up the market have only begun to show effects. Vanke can fail next year, but not this,” the blogger wrote.

Zombie developers to zombie banks?

Frank Xie, a professor at the University of South Carolina Aiken Business School, attributed Beijing’s support to Vanke’s state-owned background.

“The Chinese Communist Party cannot let Vanke fail, because the CCP [Communist Party of China] treats its own people and outsiders differently,” Xie pointed out. 

The failure of any state-owned assets would be “tantamount to the bankruptcy of national capital, questioning the Communist Party’s ability to run enterprises.”

Xie said that Chinese banks have accumulated a large backlog of mortgage loans involving real estate, and even assisting Vanke will only delay the explosion.

“As for other private companies facing the same problems as Evergrande, the CCP cannot save them, nor does it want to save them,” he added.

Beijing has also established a “white list” of approved property projects by distressed developers that banks and financial institutions should support in a stop-gap measure. Those deemed beyond rescue should go bankrupt.

2024-03-12T053841Z_1854898123_RC24K6AOK1VU_RTRMADP_3_CHINA-PROPERTY-DEBT-VANKE.JPG
A person walks past by a gate with a sign of Vanke at a construction site in Shanghai, China, March 21, 2017. Picture taken March 21, 2017. (Aly Song/File Photo/Reuters)

Chen Songxing, director of the New Economic Policy Research Center at National Donghua University in Taiwan, said that the Chinese official statement of “bankruptcy should be bankrupt” is merely to show the outside world Beijing is unable to save real estate developers. 

Chen said the amount of rescue for Vanke this time was insufficient to solve the problem, given how intertwined the real estate and banking industries are. He warned this was only a delay tactic which could lead to a bigger crisis.

“China’s current financial situation actually does not have the ability to save the real estate industry, as this is just transferring the debts of real estate developers and local governments to banks. 

“If you continue to save these zombie real estate developers this year, it is very likely that banks will also become zombies in the future. It is very detrimental to China’s economic development,” Chen said.

Edited by Taejun Kang and Mike Firn. 

Read the rest of this article here >>> China props up state-owned developer Vanke as property crisis deepens

Continue Reading

China

China to update M&A Regulations in 2024: Changes to Filing Thresholds

Published

on

China’s State Council has implemented revised Provisions on Declaration Standards for Business Operator Concentration, effective from January 22, 2024. Originally proposed by SAMR in June 2022, the 2024 Provisions have raised turnover criteria, benefiting big tech firms and multinational companies involved in M&A activities.


China’s State Council has released the revised Provisions of the State Council on Declaration Standards Regarding the  Concentration of Business Operators, which took effect from January 22, 2024.

The 2024 Provisions were initially proposed by the State Administration for Market Regulation (SAMR) in June 2022. The comparatively slow legislation process indicates the Provisions had been subjected to heated discussion within the government organs.

Notably, the 2024 Provisions dropped some specific standards proposed in the 2022 draft that required any deal involving a company with annual China revenues over RMB 100 billion to be subject to review by the authorities. According to analysts, this roll-back was designed to favor the big tech firms originally, but will concurrently benefit all multinational companies (MNCs).

This article delves into the significant revisions to China’s M&A declaration thresholds and their implications, providing crucial insights for businesses and stakeholders involved in merger activities.

The 2024 Provisions have significantly raised the turnover criteria for the declaration threshold for concentration of undertakings.

The term “concentration of undertakings” refers to any of the following circumstances:

This article is republished from China Briefing. Read the rest of the original article.

China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at china@dezshira.com.

Continue Reading

China

South Asia sides with China after Taiwan’s elections

Published

on

South Asia sides with China after Taiwan’s elections

Abstract

South Asian countries, including Afghanistan, Bangladesh, Maldives, and Nepal, expressed support for China’s claim on Taiwan, upholding the ‘One China’ principle and opposing interference in China’s internal affairs.

After Taiwan’s general elections in January 2024, where the Democratic Progressive Party secured a third term, several South Asian nations voiced support for China’s stance on Taiwan being an integral part of China’s territory and upholding the ‘One China’ principle. This display of solidarity highlights Beijing’s ability to wield economic and political leverage in the region to influence the narrative surrounding Taiwan.

Afghanistan’s Ministry of Foreign Affairs affirmed its commitment to the ‘One China’ principle, denouncing any interference in China’s internal affairs as provocative and destabilizing. Similarly, the Bangladeshi Ministry of Foreign Affairs reiterated its adherence to the principle while urging all parties to prioritize regional peace and stability, demonstrating a cautious approach to China’s economic influence.

The Maldives released a forceful statement backing China’s territorial integrity and opposing separatist activities related to Taiwan. The government expressed resistance to external meddling in China’s internal affairs and backed Chinese efforts for national reunification, aligning with President Mohamed Muizzu’s foreign policy agenda. Nepal’s Prime Minister also echoed support for the ‘One China’ principle, acknowledging Taiwan as part of China’s territory and maintaining a consistent stance despite domestic and external circumstances.

Read the complete article on East Asia Forum

Continue Reading