Doom and Gloom of China's Economy

[Armand2REP]

China's Car Dealers Will Boost Discounts Facing Rising Inventories

China's automobile dealers will increase incentives and discounts as they struggle with a worsening glut in the world's biggest vehicle market, according to the nation's top economic planner.

Average retail vehicle prices fell 1.2 percent in June from a year earlier, with those for passenger vehicles dropping 1.9 percent, said Cheng Xiaodong, head of a unit that monitors auto prices at the National Development and Reform Commission. In May, passenger-vehicle prices slumped the most in about two years because of overstocking.

"The oversupply situation persists," Cheng said in an e- mailed statement today. "Facing slugging demand and rising inventory, dealers will increase discounts and incentive offerings in the coming months."

Average inventory carried at Chinese showrooms exceeded two months of sales by the end of May, compared with more than 45 days at the end of April, Luo Lei, deputy secretary general of the state-backed China Automobile Dealers Association, said in an interview on June 6. The glut at the dealerships, which is leading to price cuts, is unsustainable, he said.

Wholesale passenger-vehicle sales rose 16 percent in June to 1.28 million units, according to the auto association. The shipments beat the 1.27 million average estimate of 14 analysts surveyed by Bloomberg. Automakers, also known as original equipment manufacturers, only disclose the number of vehicles sold to Chinese dealers, instead of consumers.

China's Car Dealers Will Boost Discounts on Inventory, NDRC Says - Bloomberg

 

[Armand2REP]

Credit crisis erupts in Zhejiang as banks recall loans

Staff Reporter 2012-07-18

A lending crisis involving several Zhejiang companies has snowballed into a province-level scandal, with 600 major private enterprises in the provincial capital Hangzhou signing a petition appealing to the local government for help in easing their credit woes, as their banks had either cancelled or recalled their loans.

Guangzhou's 21st Century Economic Report said Zhejiang finance officials had confirmed the news but had refused to reveal more details.

This marks the beginning of a new lending crisis for private enterprises in Hangzhou, after a private loan crisis erupted in the province's entrepreneurial hub of Wenzhou last year.

A representative from a Hangzhou furniture association told the newspaper that among the 600 private enterprises, many were industry giants among the top 500 Chinese private enterprises.

The incident was reportedly triggered by major banks calling in their loans. July is a major deadline for banks to recover loans and the repayment pressure for several private enterprises in the province has led to a widespread corporate capital crisis.

The petition contains two appeals: first, it suggested that the Zhejiang government set up a coordination panel to address private enterprises' capital problems. Second, it suggested that the local government coordinate with banks to suspend the recovery of loans, ensure the quota of loans is not reduced in the next three years, and temporarily redistribute loans recently recalled.

This time, the crisis was triggered by two incidents. First, the capital chain was disrupted by Zhejiang Zhongjiang Holdings, which failed to repay the high interest rates on its loans. Second, a subsidiary of the Tianyu Construction Group was reported to have illegally collected money.

Due to the system of mutual credit guarantees among enterprises, the lending crisis caused by banks recalling loans snowballed into a province-level scandal involving 600-700 companies.

A report by a banking association showed that a mutual guarantee network involved six business groups, more than 30 enterprises, mutual guarantee funds of 418 million yuan (US$65.6 million) and total assets of 5.52 billion yuan (US$866 million).

Such systems triggered a domino effect spelling disaster for many companies.

Credit crisis erupts in Zhejiang as banks recall loans｜Markets｜Business｜WantChinaTimes.com

 

[Daredevil]

China's Stocks Fall To Lowest Level Since March 2009 On Earnings

China's stocks fell, dragging down the benchmark index to the lowest level in almost 3 1/2 years, as concern about slumping profits overshadowed speculation the government will introduce stimulus measures for the economy.:shocked:

 

[Armand2REP]

Multinationals capitalize on decline of Chinese brand heavy trucks
Staff Reporter 2012-07-18

A Howo-T5g heavy truck produced by Chinese automaker Sinotruk seeing declining sales. (File photo/Xinhua)

Foreign carmakers are turning their attention to China's heavy truck market, filling a gap by domestic firms that are struggling in the country.

Total production and sales of domestic trucks during the first six months came to 1.69 million and 1.75 million, respectively, down 10.4% and 11.9% from a year earlier. For heavy trucks, production and sales fell 31.9% and 31.6%, according to the China Association of Automobile Manufacturers.

Dongfeng Motors, China's leading heavy truck maker, sold 12,000 of the vehicles in June, down 10% from the same month last year. The sales of second-ranking Sinotruk fell 15%, while JAC Motors saw its business drop by 50% over the period, according to Chinese car website ChinaCCV.

Multinational firms have seen these problems as an opportunity, and are expanding their business in heavy trucks through cooperation with Chinese carmakers. One such joint venture is the partnership between Germany's Daimler Group and China's Foton. The two companies separately invested 50% of stakes in the joint venture — Foton Daimler Automotive Company — which began operating on July 9.

A joint venture between US-based Navistar and Sinotruk, as well as another with South Korea's Hyundai and Sichuan CNJ, have reportedly been approved by China's National Development & Reform Commission.

Multinationals capitalize on China's heavy truck demand｜Markets｜Business｜WantChinaTimes.com

 

[Armand2REP]

Adidas to Close China Factory
July 18, 2012

BEIJING—Adidas is closing its only company-owned apparel factory in China as part of a move to improve efficiency.

An Adidas spokeswoman said the German sporting-goods company will close the 160-worker factory in China's coastal city of Suzhou at the end of October. The company said it will source its products from other local Chinese manufacturers. It already works with 300 supplier factories in the country.

Pedestrians walk past an Adidas store in Beijing, China.

The closure is part of Adidas' efforts to restructure business in China and globally to ensure efficiency and leverage scale, the spokeswoman said, adding that the company will not be reopening the factory elsewhere.

Athletic companies like Adidas were among the first apparel makers to offer Western-branded clothing to Chinese consumers. But the market is increasingly competitive as companies such as Gap Inc. and Swedish brand H&M Hennes & Mauritz AB open outlets across the country.

Now sportswear makers are facing a slump in China. In June, Nike Inc. which dominates the Chinese market, announced that sales in its fiscal third quarter fell 3.9% to $694 million in China's mainland, Hong Kong and Taiwan from the same period a year earlier. Chinese homegrown brand Peak Sport Products Co. also issued a profit warning for the first half and full year of 2012, citing industry-wide inventory correction and weak economic conditions that have hurt demand.

Adidas to Close China Factory - WSJ.com

 

[Armand2REP]

China Brands Lose to Western Labels

By FIONA LAW

Chinese sportswear brands, from Li Ning Co. to Anta Sports Products Ltd. have lost favor with Chinese consumers who prefer foreign brands or casual clothes.

In recent years, Chinese consumers have been moving toward the Western brands that have been cutting their prices sharply while appealing to the hip. Nike Inc. for instance, sponsors basketball star Jeremy Lin, who has a huge China fan base, while China's top brand Li Ning sponsors now-retired National Basketball Association star Shaquille O'Neal and is still closely identified with its 49-year-old founder.

Pedestrians walk past a Li Ning store in Beijing, China. Chinese sportswear brands have lost favor with Chinese consumers who prefer foreign brands or casual clothes.

Mr. Li, winner of three gold medals for China in the 1984 Los Angeles Olympics, caught viewers' eyes world-wide when he carried the torch and "flew" around the Beijing stadium at the opening of the 2008 games.

"Because they do less on research or advertising, Chinese sports brands have lost touch with what consumers want," Core Pacific-Yamaichi analyst Eugene Mak said. "Foreign brands are more popular with China's growing middle classes who can afford pricier and trendier products."

Last week, following a profit warning, Li Ning said it is replacing its chief executive of 20 years with the founder, and investor TPG Group is stepping in to overhaul operations.

Two smaller Chinese sportswear brands, Peak Sport Products Co. and China Dongxiang Group Co. which has the China franchise for Italy's Kappa shoes, also said tough competition should eat into their earnings this year, and warned of lower profit.

In the wake of the 2008 Olympics, these brands saw a surge in sales, with revenue at Li Ning and rival Anta, which sells Fila clothes and shoes, rising over 50%. Sales growth has since been falling. From heights of 60 times earnings, Li Ning is now trading at 23 times and is down 28% this year, while Anta, valued at 33 times, is down to nine times.

In contrast, Chinese retailers like Belle International Holdings Ltd. which sells fashionable high-heels as well as sportswear, are up 45% since 2010.

"We like investing in Chinese consumer-focused companies but, even among businesses in this attractive sector, there are no guarantees as declines in the fortunes of some Chinese sportswear brands is reflected in their continued buildup of inventory," said George Raffini, managing partner at private-equity firm Headland Capital Partners, which bought a stake in down-apparel maker Bosideng International Holdings Ltd. before it listed in 2007.

In 2011 alone, domestic sports brands had inventory levels climbing 36% to 58% from a year earlier, the annual reports of these brands showed. The brands have also over expanded, opening mainly franchise shops. Between 2007 and 2010, Anta as well as the other Hong Kong-listed Chinese sports brands—Li Ning, Xtep International Holdings Ltd. and China Dongxiang—opened a combined 9,900 stores in China.

Western sports brands, such as Nike and Adidas, that began selling in China in the 1980s, are gaining share. They had 24% of China's sports apparel and shoe market in 2010, according to Euromonitor, but that should rise to 28% next year, at the expense of home grown brands, Barclays estimated.

China Brands Lose to Western Labels - WSJ.com

 

[tony4562]

Adidas to Close China Factory
July 18, 2012

BEIJING—Adidas is closing its only company-owned apparel factory in China as part of a move to improve efficiency.

An Adidas spokeswoman said the German sporting-goods company will close the 160-worker factory in China's coastal city of Suzhou at the end of October. The company said it will source its products from other local Chinese manufacturers. It already works with 300 supplier factories in the country.

Pedestrians walk past an Adidas store in Beijing, China.

The closure is part of Adidas' efforts to restructure business in China and globally to ensure efficiency and leverage scale, the spokeswoman said, adding that the company will not be reopening the factory elsewhere.

Athletic companies like Adidas were among the first apparel makers to offer Western-branded clothing to Chinese consumers. But the market is increasingly competitive as companies such as Gap Inc. and Swedish brand H&M Hennes & Mauritz AB open outlets across the country.

Now sportswear makers are facing a slump in China. In June, Nike Inc. which dominates the Chinese market, announced that sales in its fiscal third quarter fell 3.9% to $694 million in China's mainland, Hong Kong and Taiwan from the same period a year earlier. Chinese homegrown brand Peak Sport Products Co. also issued a profit warning for the first half and full year of 2012, citing industry-wide inventory correction and weak economic conditions that have hurt demand.

Adidas to Close China Factory - WSJ.com

The perfecture-level city Suzhou outputs twice as much GDP as the entire state of Bihar despite of having only 6 million people. It is packed with high-tech electronics industry ta same time being a popular tourist destination, so quite understandably a low tech shoe factory does not feel at home in Suzhou and is therefore moving to (Burma). In about 10 years, Burma will probably move up the food-chain so much that Adidas will try to relocate to your home town, Armand.

 

[Daredevil]

IMF cuts China economic growth forecast, warns 'hard landing' still possible


The International Monetary Fund cut its growth forecast for China's slowing economy Monday and said a "hard landing" was still possible.

The IMF reduced its China growth outlook for 2012 by 0.2 percentage point to 8 percent and for 2013 by 0.3 point to 8.5 percent. That is far stronger than the United States and Europe, but China's slowdown has dampened hopes it might make up for weak Western demand and drive global growth.

 

[Daredevil]

Chinese companies see profits plunge amid slowdown

BEIJING — Some of China's biggest companies, from tech giants to airlines and retailers, are warning of unexpectedly sharp drops in profit of up to 80 percent, adding to pressure on Beijing to reverse a painful economic slump.

On Wednesday, Air China Ltd., one of three main government-owned airlines, warned first-half profit will fall by at least half from a year earlier. State-owned ZTE Corp., one of the world's biggest producers of telecommunications equipment, is projecting a decline of up to 80 percent.

The woes facing even politically favored companies that benefit from monopolies, low-cost bank loans and other government aid highlight the challenges for the authoritarian country's leaders who are trying to pull China out of its deepest slowdown since the 2008 crisis.

Forecasters say the slowdown might have bottomed out after growth fell to a three-year low of 7.6 percent in the second quarter but the timing and strength of a rebound are uncertain. Premier Wen Jiabao warned last weekend a recovery was not yet stable. On Tuesday, he said the employment outlook "will become more complex and severe."

"Economic growth will be unstable for the next six or even 12 months at quite a low level," said Zhang Jiuhui, an analyst for Great Wall Securities in Beijing.

Beijing has cut interest rates twice since the start of June and is pumping money into the economy through spending on building low-cost housing and other public works. It is trying to use targeted measures instead of flooding the economy with money after a binge of spending and bank lending that helped China rebound quickly from the 2008 crisis fueled inflation and a wasteful building boom.

China's expansion is still far more robust than the United States and Europe but its companies have come to depend on unusually high growth to stay profitable.

Industries that rely on demand for new factories and equipment have been hurt as struggling manufacturers put off spending and Beijing enforces curbs imposed on home purchases to cool surging prices. The country's shipbuilding industry association says May orders for new vessels were half the level of a year earlier.

"We have seen more profit warnings than expected in the first half and there might be more than there were in 2008," said Mao Sheng, a strategist for Huawei Securities in the western city of Chengdu.

ZTE's statement Friday said some Chinese phone companies were postponing new equipment orders – a downbeat sign for Beijing, which is pinning its hopes on higher investment to drive growth.

"Air China and ZTE are examples of companies that were hit by rising costs and reduced investment," said Mao. As for the timing of a recovery, he said, "although we saw some positive figures such as (higher) loans and home sales in June, those still have to be confirmed in coming months."

Some 233 companies with shares traded on mainland China's two exchanges expect to report losses for the first half, while another 449 expect lower profits compared with a year earlier, the official Xinhua News Agency reported Wednesday.

Growth in retail sales has declined steadily, a setback for government efforts to reduce reliance on exports and investment by creating consumer-driven growth.

TCL Corp., one of the world's biggest producers of televisions and other consumer electronics, said Sunday its first-half profit will be "significantly lower." A major appliance retailer, Suning Appliance Co. Ltd., warned its own profit might fall by 30 percent.

Li Ning Co., a maker of athletic shoes and sportswear, issued a profit warning in early July and announced the departure of its CEO and the launch of an overhaul to improve efficiency and profitability.

The squeeze is so severe its effects are spreading to companies that receive low-cost bank loans and other aid as part of government efforts to create elite enterprises to dominate industries from energy to airlines to telecoms.

Major state companies tend to be in capital-intensive industries. They create fewer new jobs as investment rises but are less likely to cut their workforces when profits decline.

Air China blamed its lower profits on weak travel demand at home and abroad. China's two other major state-owned airlines, China Eastern and China Southern, issued similar warnings earlier. The airlines received large injections of public money after suffering losses in the 2008 crisis.

In the auto industry, Dongfeng Motor Co. Ltd., the local partner of Nissan Motor Corp., warned last week its first-half profit will be down 60 to 70 percent.

Auto sales rose 3 percent in the first half of the year, but that was down from double-digit growth of recent years. A sales boom in 2009-10, driven by tax cuts and subsidies, prompted brands to expand production capacity, leading to abundant supplies and squeezing profits once the incentives ended.

Smaller and private companies face even tougher conditions and possible losses.

Da Ming International Holdings Ltd., which says it is China's biggest processor of stainless steel used in manufacturing automobiles, appliances and other products, warned Wednesday it expects to suffer a first-half loss due to falling prices for its products.

 

[Armand2REP]

Half of Shanxi's private coal companies likely to close

Three lawsuits over private loan disputes against Zhenfu Energy Group, a coal company in Shanxi in northern China, reveal that local coal companies are experiencing unexpectedly difficult financial conditions despite their enormous investment in technological reforms and resources. Such a situation has not been seen in the past 10 years.

China Credit Trust Co, ranked third by assets under management in 2010, announced on June 26 that Zhenfu Energy Group had three lawsuits against it in the second quarter of this year. The announcement attracted attention from trustees, who sent specialists to check and take immediate measures to control risk and protect investors.

The company was established in July 2010, when its founder Wang Yusuo invested 5 million yuan (US$784,500) and his son Wang Pingyan invested 45 million yuan (US$7.06 million) to acquire a 90% stake.

Local people revealed to Shanghai's First Financial Daily that the Wangs may have borrowed up to 2 billion yuan (US$314 million) from private lenders.

After undergoing reforms, one third of the previous coal enterprises in Shanxi remain in the market. Out of all cities in the province, Luliang saw the largest number of its coal companies survive. About 60 out of the 112 coal mines in Luliang are operated by private enterprises, including Zhenfu Energy Group.

If not for the lawsuits, the group could have ushered in a golden period in its development. Zhenfu has five coal mines and a coal preparation plant as well as several coal mines that are either awaiting approval or are under construction, presenting a significant financial burden to the group.

Zhenfu called for 600 million yuan (US$94 million) in investment in one of its coal mines which has an annual production capacity of 900,000 tons.

Meanwhile, Luliang invested 7-8 billion yuan (US$1.1 billion-$1.26 billion) in building coal wells last year. Private coal enterprises need to integrate coal wells to increase their capacity and scales.

"If you don't want to be acquired by state enterprises, you have to buy more coal wells to reach your goal. However, private enterprises apparently do not have the advantages of state enterprises and inevitably need to spend big money to stay afloat," an official in Luliang told the newspaper. Coal mine owners who require hundreds of millions of yuan in investment have no choice but to turn to loan sharks.

Lengthy technological reforms and large monthly interest payments have put coal mine owners under even heavier financial pressure. Making matters worse, declining coal prices, high inventories and a slump in operations have caused mine operators to become cautious and pessimistic. "If the situation continues, more than half of the private coal companies here will have to shut down," an official in Luliang responsible for the coal sector said.

Shanxi's private coal companies struggle to survive｜Economy｜News｜WantChinaTimes.com

 

[Armand2REP]

Over 2000 Guangdong factories may close as exports falter

China Daily

More than 2,000 Hong Kong-owned factories in the Pearl River Delta may close this year as export orders fall and wages rise, a business association said.

Stanley Lau, deputy chairman of the Federation of Hong Kong Industries, gave the estimate in a phone interview. The organization's members have garment, watch, toy and footwear factories in the export hub of Guangdong.

Guangdong factories may close as exports falter |Economy |chinadaily.com.cn

 

[tony4562]

Over 2000 Guangdong factories may close as exports falter

China Daily

More than 2,000 Hong Kong-owned factories in the Pearl River Delta may close this year as export orders fall and wages rise, a business association said.

Stanley Lau, deputy chairman of the Federation of Hong Kong Industries, gave the estimate in a phone interview. The organization's members have garment, watch, toy and footwear factories in the export hub of Guangdong.

Guangdong factories may close as exports falter |Economy |chinadaily.com.cn

Guandong has millions of factories, 2000 is nothing. Currently with India's economy very much on the brink of imploding, probably that many factories go bankrupt in India every day.

 

[Daredevil]

Guandong has millions of factories, 2000 is nothing. Currently with India's economy very much on the brink of imploding, probably that many factories go bankrupt in India every day.

1000s become 10,000s and the become 100000 and then millions. Its only a matter of time. Now all these companies have no work and the loan burden keeps on increasing, labour unemployment will keep increasing, consumption decrease and a whole cascade of effects will be seen as a result of slowdown in exports and investment.

Fortunately, India doesn't suffer from Overcapacity like China does with excess factories with no work. In fact, India suffers from under capacity where it is in requirement of more new companies.

 

[Armand2REP]

Guandong has millions of factories, 2000 is nothing. Currently with India's economy very much on the brink of imploding, probably that many factories go bankrupt in India every day.

In 2005 Guangdong was home to 60,000 factories. So much for millions.

 

[trackwhack]

Guandong has millions of factories, 2000 is nothing. Currently with India's economy very much on the brink of imploding, probably that many factories go bankrupt in India every day.

Millions of factories? Really?
OK let's start with the assumption that there are one million factories. Let us assume that the average annual produce of each of these factories is a measly million dollars each. That's a trillion dollars in produce. That's one fifth of your Gdp.
When you pull numbers out of your arse, think a million times before posting it here.
Frigging troll. Millions of factories indeed.

 

[Armand2REP]

When over 9000 factories in Guangdong closed in 2008, 2.7 million people were out of work. At that time there were only 45,000 factories in Dongwan, Shenzhen, and Guangzhou combined.

 

[Armand2REP]

Nokia to close 2 distribution centers in China

Nokia Corp, which is struggling to survive as it competes with iPhone and Android phones, will cut jobs in China, its biggest regional market.

Its four distribution centers in Chengdu, Beijing, Shanghai and Guangzhou will be integrated into two centers in Beijing and Guangzhou. It will lay off people but the details and figures are not available, said Gao Xiang, Nokia China's spokesperson, yesterday.

Wang Ying, analyst at Beijing-based research firm Analysys International, said: "Apple and Google (with Android) have changed the industry structure completely through software and a service-oriented business model.''

By the end of the first quarter, Nokia's market share in China was 11.4 percent, behind Samsung's 24.86 percent and Huawei's 12.6 percent, said Analysys. Years ago Nokia had over 30 percent of the market.

Troubled Nokia to cut jobs, 2 distribution centers in China - What's On Shenzhen

 

[Armand2REP]

Nokia Plans To Close Two Of Its Four China Sales Offices

Nokia will close two of its four regional sales offices in China, as part of a restructuring plan the company announced last month to halt mounting losses from plunging smartphone sales.

Nokia will shut offices in Chengdu and Shanghai and consolidate operations at a northern center in Beijing and a southern hub in Guangzhou, Anna Shipley, a Beijing-based Nokia spokeswoman, said in an e-mail today. The moves will eliminate jobs, she said, without providing details.

Nokia Plans to Close Two of Its Four China Sales Offices - Bloomberg

 

[Armand2REP]

Looks like Nokia is cutting its operations in China by half.

 

[tony4562]

Nokia is dying. Cutting workforce in China has everything to do with Nokia self, little or none to do with China.