Tag Archives: Economic

Industrials face turbulence from cooling China

Buoyant Chinese demand has been a wonderful palliative for western industrial companies in recent years that helped to offset anaemic European and US sales.

However, comments from leading industrial companies last week suggest Chinese demand for a host of western-produced capital goods ranging from earthmoving equipment to automation technology is – at least temporarily – starting to slow.

China’s efforts to cool a real estate boom and engineer a soft landing come as its manufacturers hold back fixed-asset investments due to tighter credit, overcapacity and slower demand from the debt-encumbered eurozone.

Volvo, the commercial vehicles group, warned as early as last summer of an impending slowdown in Chinese demand for construction equipment, which it described as temporary.

In October ABB, the Swiss electrical engineering group, also observed weaker demand for its power systems and process automation technology in China, where overall orders declined by 5 per cent in the third quarter.

Now, as European and US industrials have begun reporting their latest quarterly figures, more companies have expressed caution on the short-term outlook in China. Read more »

Danish factories move out from China

According to Danish media, increasing number of Danish companies to moving their factories back to Denmark than manufacturing in China. An example could be that a Danish company called T-REX, who has been producing accessories for music instrument in China for 7 years, has decided to shut down its production facilities in China and move back to Denmark. Those companies believe that it’s more profitable to produce in their homeland than “Made in China”.

Along with economic development in China, cost prices of raw material as well as labour force are increasing rapidly. With language and culture problems on top, many Danish companies believe that continuing producing in China is a waste. By contrast, it’s more profitable to produce in Denmark.

Due to the fact of financial crisis, many companies have to simplifies their structures and business areas to minimise expenditures.

According to Economic and commercial Counsellor’s Office of Embassy of the PRC in Kingdom of Denmark.

IMF: Global Economy Is Entering a “Dangerous” Phase

IMF (International Monetary Fund) believes that the world economy is perhaps becoming decreasing. A new recession is approaching, due to economic downturn across Europe and the U.S. In terms of production, nations including Denmark, Germany, the Netherlands and Poland are back to pre-crisis levels.

Truckers’ strike in Shanghai alerts the dangers of high inflation


From Financial Times – Chinese, by Tom Mitchell (the FT’s deputy news editor)
Posted on April 25, 2011
Original Title: Truckers’ strike alerts Beijing to dangers of high inflation

A man throws a rock at a non-strike truck - REUTERS/Carlos Barria

Carworkers in southern Guangdong province warned the world last year it could not take cheap Chinese labour for granted any more by successfully agitating for higher wages in a series of industrial actions. Shanghai truckers reinforced that message with a strike of their own last week.

The Chinese government is always wary of workers who possess the wherewithal to organise independent industrial action outside the auspices of the country’s only sanctioned union, the All China Federation of Trade Unions. But Shanghai’s truckers undoubtedly frighten Beijing more.

The adage in western democracies that “all politics is local” has a parallel in authoritarian China, where almost all social unrest is local too. Dozens if not hundreds of small-scale protests, typically labour or land-related, flare every day.

For all the attention they commanded, the Guangdong strikes were in keeping with this pattern. Each concerned pay and conditions on the factory floor and they were resolved on the factory floor. The ire was directed at management, most notably at factories run by Honda and other Japanese carmakers.

Shanghai’s truckers latched on to something larger that, from the Chinese government’s perspective, made their strike potentially more dangerous. They were more explicit about their impatience with inflation in the form of the rising port fees and fuel costs that are eroding their ability to make a living. As one trucker told the FT: “This truck is all I have to support my wife and kid.”

Police is on duty during a truck driver strike at a seaport in Shanghai

Port fees can be blamed on port operators, even if they are state-owned, and at the weekend the Shanghai Transport and Port Authority announced a reduction or cancellation of various charges. In doing so the authority did not mention the strikes, saying only that the fee cuts were aimed at “easing rising inflation and cost pressures on transport companies”. It also lowered the monthly fee taxi drivers must pay for their vehicle, in a canny effort to prevent the port protests on the city’s outskirts from spreading into Shanghai proper.

If only Beijing could fix inflation as readily as it fixes fees. Interest rate increases and other measures aimed at reining in price rises have thus far failed to have their intended effect, with inflation hitting a 32-month high of 5.4 per cent last month. As Wen Jiabao, China’s premier, put it recently, the government is discovering that inflation is a tiger that “once set free is very difficult to put back in its cage”.

The government will have gotten off lightly should this weekend’s fee reductions prove enough to send Shanghai’s truckers home, especially if they disperse before drivers in other cities cotton on to their example. As with last year’s Honda strikes, censors have imposed a strict media blackout to prevent exactly that.

Shanghai has the largest container terminal on the world

While the authorities can do little to prevent vertical explosions of local discontent – think of thousands of little volcanoes erupting all over the country – they are ruthless when it comes to eradicating any horizontal linkages that might give rise to larger co-ordinated movements. Hence the brutality they unleashed on the highly networked Falungong cult a decade ago, and more recently their over-reaction to the anonymous internet pleas for “jasmine” protests inspired by this year’s Arab spring.

As for the truckers’ concern about the rising price of diesel, increasing China’s already generous fuel subsidy would be too costly and humiliating a concession for such a localised disturbance. Beijing sets fuel prices and has raised them twice already this year.

Yet Chinese truckers still pay just $1.05 per litre of diesel fuel – 35.1 per cent below the international market price – and the government fears the financial consequences of this year’s oil price surge. Minggao Shen, a China equity analyst at Citibank, has estimated that $150 a barrel oil would cost the government $66bn annually in subsidies.

But even if Shanghai’s truckers fade away quietly this time, they have already proved that one of the government’s worst fears was not misplaced – inflation can and will continue to inspire protests and social unrest. Another long, hot summer is just beginning on the Chinese mainland.

From Financial Times – Chinese, by Tom Mitchell (the FT’s deputy news editor)
Posted on April 25, 2011
Original Title: Truckers’ strike alerts Beijing to dangers of high inflation


Unilever bows to Beijing pressure: a new regulatory risk in an inflationary climate


From “Financial Times
Original Title: Unilever bows to Beijing pressure by putting off planned price increases
By Patti Waldmeir in Shanghai, Robin Kwong in Taipei, Alexandra Stevenson in London

Unilever, the Anglo-Dutch consumer goods group, has bowed to pressure from Beijing to delay planned price increases, highlighting a new regulatory risk in an inflationary climate.

While Chinese authorities routinely force state-owned enterprises to place the public interest ahead of commercial concerns, Unilever’s confirmation of the government’s request signals that large foreign multinationals are not immune to such pressure.

A Unilever spokeswoman in London said, “I can confirm that Unilever China received a request from the National Development and Reform Commission and has chosen to comply with it, and postpone price adjustments previously scheduled for April 1.”

Chinese consumers, increasingly alarmed at the rising cost of living, cleared supermarket shelves earlier this week of shampoos, soaps and detergents after state media said four consumer goods companies – including Unilever and Guangzhou Liby Enterprise Group – would raise prices by 5 to 15 per cent.

Alarmed by the reaction, Beijing is understood to have contacted companies to urge price restraint. China’s consumer price index rose 4.9 per cent year-on-year in February.

“When you wake up and see photos of old people rushing into supermarkets in a panic, that is a signal to government that this is a serious problem,” said Shaun Rein of China Market Research in Shanghai.

Alongside Unilever, Liby – another leading detergent producer – and Tingyi, which produces half of China’s instant noodles, agreed to delay planned price rises.

Tingyi said it acted “in alignment with the policy of the state for maintaining the stability of commodity prices”. Wei Ing-chou, chairman and chief executive, had spoken of the need to “watch which way the [political] wind blows”, when announcing the rise but, explaining the delay on Friday, the company pointed to signs that raw material prices were stabilising.

Luo Zhiping, analyst with Business Information Research, a Shanghai-based consulting firm with close ties to government, said the goal was to “prevent consumer chaos” after widespread panic-buying of salt, which was viewed as an antidote to potential radiation from Japan’s earthquake-crippled nuclear power station. By firing this shot across the bows of companies whose planned price increases were widely publicised, Beijing should be able to convince a wide range of companies to contain most prices, at least temporarily, he said.

Unilever would not say how long it would postpone the price rise.

Liby said that after being contacted, it had decided “to take the whole situation [of the market and consumer reaction] into account” and delay or even rescind price increases that had already been put in place.

From “Financial Times
Original Title: Unilever bows to Beijing pressure by putting off planned price increases
By Patti Waldmeir in Shanghai, Robin Kwong in Taipei, Alexandra Stevenson in London

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