China Watch Blog

China Watch Blog has learnt that China’s manufacturing activities rebounded to a year’s peak in March, signaling a steady economic expansion aided by the warming-up market demand.

According to the official Purchasing Managers’ Index (PMI) released on Sunday, and reported by the China Daily, March’s sudden rise didn’t erase economists’ worries about a continued cooling economy as they felt that there is still space for easing monetary policy to support industrial businesses depending on the changing situation.

The PMI, a gauge to indicate manufacturing expansion, jumped to 53.1 in March, the highest since April 2011, compared with 51 in February and 50.5 in January, according to the National Bureau of Statistics (NBS) and China Federation of Logistics and Purchasing (CFLP) which jointly released the data.

This figure is based on a survey of managers from more than 800 companies in 28 industries. A reading above 50 means expansion, and a number below 50 shows contraction.

March’s PMI indicated that economic growth was rebounding at a faster pace thanks to the increase in new overseas orders amid the easing European debt crisis, according to Zhang Liqun, a senior economist at the Development Research Center of the State Council.

According to the NBS and CFLP statements, a sub-index of new orders climbed to 55.1, a 15-month high, from February’s 51. In the meantime, the output index reached 55.2 in March, which was at a peak since May 2011, indicated an accelerating production in the industrial sector.

“But the economic growth may still slow in the coming months because there is a gap between the PMI figure and the real business situation,” said Zhang.

HSBC Holdings Plc released its own PMI survey that gave a reading of 48.3 in March, further dropping from February’s 49.6, signaling a fifth successive month-on-month deterioration in manufacturing operating conditions.

The Hong Kong-based bank said that a continually slowing growth dragged down by weakening new export orders is likely to prompt further easing monetary policies.

“We still expect at least another round of cuts in the required reserve ratio (RRR) of 100 basic points in the first half and additional tax breaks and fiscal spending,” said Qu Hongbin, Chief Economist of Asian Economic Research at HSBC, said in a research note.

China Watch Blog has learnt that the Australian competition regulator will take Apple to court for allegedly making misleading statements about the wireless internet capability of the third generation iPad.

The Australian Competition and Consumer Commission (ACCC) has accused Apple of breaking the consumer law by promoting the new iPad as being able to connect to high-speed 4G mobile networks using a sim card.

The ACCC says the new iPad does not work on any Australian 4G network.
It is seeking an urgent court order to force Apple to correct its advertising and make refunds to customers.

The ACCC will make the application in the Federal Court in Melbourne this morning.

California-based Apple announced last week that it sold three million of the latest tablet computers in its first weekend on the market – the strongest iPad launch yet.

The latest case is not the first time Apple’s technology has landed in Australia’s courts.

The firm is locked in a legal battle with rival Samsung over tablet patents, part of a wider global tussle over supremacy of the $100 billion market.

China Watch Blog has learnt that Chinese consumers are up in arms over “Italian” luxury goods that were recently revealed to have been manufactured in China, something they cannot imagine.

The Beijing office of the Intellectual Property Rights Department of the Italian Trade Commission (ITC) recently submitted a list of 30 brands that are advertised as having Italian origin to China’s State Intellectual Property Office, according to a China Daily report.

The report said the products specified include bags, leather goods and bedding, some of which are sold for higher prices than domestic products or even genuine imported goods. Italian addresses and phone numbers printed on the products’ packaging were found to be falsified – the trademark of the China’s counterfeiters.

“These pseudo-Italian brands lure customers by claiming to originate from Italy,” said Giovanni de Sanctis, an ITC official.

Some of the brands feature the tricolor Italian flag or fabricated stories about their Italian origin on their packaging, he said.

“Such false adverting does not directly harm the image and interests of Italian enterprises, but does constitute unfair competition for enterprises in both nations,” he said.

De Sanctis said that if the products are poorly produced, they could harm the image of Italian companies and their Chinese peers.

ITC established a Beijing office for its Intellectual Property Rights Department in July 2010 for the express purpose of protecting the image and interests of genuine Italian brands. The office has ferreted out 60 false Italian brands on the Chinese market thus far, although it has only reported three cases to intellectual property authorities.

One company that came up on the office’s radar was Toskany, a company that sells leather goods in China. The company has claimed to have originated in the Italian city of Tuscany in 1928 and established shops in over ten countries and regions.

However, an Italian investigation revealed that the company was never registered in Italy, and its goods are supplied by a Beijing-based leather manufacturer.

China Watch Blog has learnt that the situation surrounding China’s exports will become more complicated and severe in the coming months amid an increasing number of trade protectionist measures and slackening global demand, the China Daily reported, citing the Ministry of Commerce.

China will roll out policies regarding currency and tax rebates to bolster exports, Zhong Shan, deputy minister of commerce, said at a forum in Beijing, adding that it will be more arduous for the Chinese government to stabilize export growth.

According to the General Administration of Customs, China’s exports declined 0.5 percent over the year in January, the first fall in more than two years. During the first two months, Chinese shipments grew by merely 6.9 percent year-on-year.

The figures are far less than the previous year and they set a pessimistic tone for the whole year, Zhong said.

From January to February of 2011, China’s exports grew by 21.3 percent year-on-year.

According to Zhong, industrial competitiveness, global demand and the business environment are the decisive trends for the nation’s exports, and they are all “not favorable”.

China is losing its dominant competitiveness in labor costs as the nation pledges to raise minimum wages for workers to improve their livelihoods, Zhong said.

China Watch Blog reports that about 1,118,000 purchasers have been invited to attend the 111th session of China’s largest trade fair – China Import and Export Fair (Canton Fair), up 12.13% more than the previous fair attendance – which will open on April 15 in Guangzhou.

Guangzhou

A total of 702 booths are added in this session to offer a platform to ease export pressure and promote a steady growth of China’s foreign trade.

According to Liu Jianjun, spokesman of Canton Fair, the fair, which will be held under the economic pressures facing the international economy, is being held at a time of rising risk of fluctuating production costs and other factors.

Although some SMEs have chosen to abandon their manufacturing and are engaged in capital investment, there are still a great number of enterprises which want to deal with the risks and challenges involving the country’s export trade.

“The Import Pavilion of the Canton Fair is very popular, which indicates that the Import Pavilion has great development potential,” said Liu.

Liu was quoted as saying in a GZNews.com report that the Western enterprises are willing to expand exports to China, hoping to revitalize the manufacturing sector and improve the employment rate.

China Watch Blog has learnt that Hong Kong-founded manufacturers in the Pearl River Delta (PRD) region report a 10 percent hike in average wage this year compared with last year’s 11 percent, a study by Standard Chartered Bank shows.

The China Daily reported that wages are still on an uprising trend in the manufacturing heartland on the mainland in 2012, albeit the pace is at a slower pace over last year. After speaking with 204 Hong Kong manufacturers who operate their business on the adjacent PRD region in January, Standard Chartered said more than half of the respondents have already lifted the wages an average of 10.4 percent for the year.

About 30 percent of companies surveyed indicated that they will raise the wages some time in 2012 by an estimated 9 percent, while the remaining 12 percent did not plan any wage adjustment this year.
Kelvin Lau, the region’s senior economist from Standard Chartered said the wages growth rate among mainland-based Hong Kong manufacturers in the survey is also slower than the minimum wages in many PRD cities.

Effective from this month, Shenzhen’s minimum wage has been lifted to 1,500 yuan per month, up 13.6 percent from 1,320 yuan per month in the past. Some Guangzhou news reports said that the city’s minimum income is expected to reach 1,470 yuan per month this year, up 13.1 percent from the current 1,300 yuan per month.

“In line with the still-evident wage pressure, only 30 respondents considered it less difficult to find workers compared with the same time last year,” Lau added.

Stanley Lau, deputy chairman of Federation of Hong Kong Industries, said earlier that 30 percent of the mainland-based Hong Kong manufacturers may be eliminated by the year end given the rising material cost as well as the wage hikes.

“To these 50,000 to 60,000 Hong Kong small and medium enterprises (SMEs) in the PRD region, it means around 15,000 to 18,000 companies will contract, or close down their businesses this year,” Lau said, adding that these labor-intensive and low value-added businesses are among the high-risk group.

However, a majority of companies said higher productivity would help offset the rising labor cost as output per worker has risen faster than wage increases, according to the survey.

The business outlook for the next six months is also not too bleak for these manufacturers as over half of the respondents saw added orders in the first half this year, despite major importers, including the US and the Europe not seeing much economic improvement.

China Watch Blog has learnt the Purchase Management Index (PMI) in Feb. 2012 was 51 percent, a 0.5 percentage point increase from January.

According to statistics issued by the China Federation of Logistics and Purchasing (CFLP) and the Service Industry Investigation Center of National Bureau of Statistics, by February, PMI has rebounded for three consecutive months.

The main leading indexes such as new order and purchasing volume have picked up obviously, which reflects that current market demand expands, production and business activities become more active and the overall manufacturing presents a steady upward trend.

In the 11 sub-indices, only the raw materials inventory index decreased and the remaining all rose in varying degrees compared to the previous month. Among them, the new order index, order backlog index and purchasing price index rose greatly, exceeding four percentage points.

Industrial production growth rebounded. This year, production index maintains a stable upward trend. It reached nearly 54 percent in February, the highest since last June. At the same time, raw materials inventory index decreased significantly, about 1 percentage point down compared to last month and to about 49 percent. The change trends of these two indexes signal that the current industrial production growth is picking up.

New export order index rose remarkably. The new export order index in February was about 51 percent, 4.2 percentage point up than last month and rising to over 50 percent for the first time since last August.

The development momentum of small businesses is getting better. Since the beginning of this year, the PMI of small businesses has picked up significantly, having ended the situation of run at lower than 50 percent for as long as eight months. The PMI last month was 52 percent; then rose further in February, reaching over 55 percent, more than 4 percentage points higher than the national average.

China Watch Blog has learnt that senior Chinese legislators on Monday started their second deliberation on a draft amendment to the country’s Law on the Promotion of Clean Production.

The China Daily reported that at the three-day bimonthly session of the Standing Committee of the National People’s Congress (NPC), members are scheduled to review the newly submitted draft amendment, which has introduced a few key changes after several rounds of opinion gathering.

The new draft highlights a concise definition on the “excessive packaging of products” and a list of detailed conditions under which compulsory clean production checks should be imposed on enterprises.

Chinese legislators believe that the current law, which came into effect in 2003, needs to be revised to meet the requirements on energy conservation and emissions control in the country’s bid to build a greener and more sustainable economy.

The NPC Standing Committee’s review on the previous draft took place last October.

China Watch Blog has learnt that small and medium-sized enterprises (SMEs) are unlikely to close on a large scale this year, as they will receive 3 billion yuan ($475.6 million) annually in central government support for the next five years.

According to the Ministry of Industry and Information Technology, since the first quarter of 2010, SMEs have faced such problems as high production and labor costs and an unfavorable international environment, and export-driven SMEs have been hurt by the weak global economy.

China Daily reported the State Council as urging local governments to offer support for the development of smaller companies.

On Feb 1, the council discussed the issue in an executive meeting and announced that the government would further support SMEs by establishing a 15-billion-yuan fund.

Small companies “serve as a significant channel for creating jobs, a major platform for the growth of entrepreneurship and an important force for scientific innovation”, according to a statement released on Feb 1 and reported by the Xinhua News Agency after the State Council executive meeting presided over by Premier Wen Jiabao.

“The Ministry of Finance will allocate 3 billion yuan every year over the next five years and the State Council will release policy documents on further development of SMEs in the near future,” said Zhu Hongren, spokesman and chief engineer at the industry and information technology ministry.

The ministry noted that exports had cooled, and industries’ export shipments had increased by just 16.6 percent last year, slower than in previous years.

China Watch Blog has learnt that since last week the annual exodus of workers returning to their hometown has started, and those who are living outside the mainland cannot imagine the large number of people travelling throughout the length and breadth of the country during this period unless you see it happen before your eyes.

All transportation systems come under heavy pressure during this period, particularly buses and railways. Of course, those who can afford it fly as well for convenience, but even the airlines are full.

For the Chinese this is the time for annual reunion dinners with their families and so that this why they try to return to their hometowns.

Prices of tickets have also risen so travelling in China during this period until the Spring Festival which starts on Jan 23 is no fun.

Offices and factories are already thinning out and some are already operating with a skeleton staff as many have started to take leave.

Meanwhile, shippers are trying to get out goods before the long holiday season starts, but all the Hong Kong and Chinese ports are jammed packed.

Some have to resort to shipping goods out by airfreight to be able to get their products to the final destination on time.

Shopping malls are also jammed with shoppers trying to buy Chinese Lunar New Year goodies as there are sales everywhere.