• Retail sales in Beijing rose to Yn339bn (£30bn) in the first eight months of 2009, up 14.3 per cent year-on-year, reports Savills. Outlet stores benefited greatly from the economic downturn.

• French luxury brand Louis Vuitton plans to open a 2,000-sq m flagship store, one of the largest in the world and the largest in China, in Shanghai before the Expo starts in May 2010.

• Retail sales during the eight-day National Day holiday in October hit a new high, with the home appliances, jewellery and catering sectors all experiencing a surge.

• Lotte Shopping, South Korea’s biggest department store owner, is to buy the Chinese supermarket operator Times Ltd in a deal reported to be worth US$625m. Lotte, which is reported to have beaten China’s Wumart Stores to clinch the deal, will gain 65 stores on the Chinese mainland.

Sources: CBBC, Xinhua, Financial Times, Wall Street Journal, FCO Country Updates and other news sources.

Over the years, B2B International has worked for several of the large global courier transportation companies.  It was, therefore, with interest that we read the following article in Media recently, which discusses the changes that have occurred in this sector within China in the last year or so:

SECTOR INSIGHT… ‘BIG FOUR’ EYE GROWTH IN CHINA DELIVERY MARKET

UPS, DHL, FedEx and TNT have been cutting Chinese adspend despite ambitious plans to expand.

It was hard to miss UPS at last year’s Beijing Olympics. Life-size cut-outs of brown-garbed UPS deliverymen sequipment from improbably small packages, while the slogan read ‘Nothing is impossible - UPS delivered everything and anything to the Beijing Olympics’.

As the event’s sponsor and official courier service, UPS used every opportunity to display its logo. Nielsen data shows UPS spent Rmb 404 million (US$58.6 million), or 61.4 per cent of the Rmb 655 million that courier services spent on TV and print last year. Its global rivals DHL and FedEx spent Rmb 128.5 million and Rmb 90.7 million, respectively, while TNT was, in terms of adspend, nowhere in sight. Besieged incumbent EMS, a subsidiary of China Post and officially named China Courier Service Corporation, spent a more modest Rmb 24.3 million.

A year later, things have changed. UPS has cut back so severely that it is no longer the top advertiser. During the first eight months of 2009, UPS spent just Rmb 74 million. The sector’s overall ad investment totalled only Rmb 253.8 million in those months.

One might suspect a post-Olympics hangover or the global economic downturn, especially since the latter resulted in a sharp drop in air cargo leaving China for the US and Europe.

Both certainly have influenced promotion budgets, but the decline in adspend actually began before the Olympics or the September collapse of Lehman Brothers. DHL slashed its budget from Rmb 367.2 million in 2007 to Rmb 128.5 million in 2008, and in September of that year announced a pitch involving no TV work. FedEx, which spent Rmb 260.6 million in 2007, cut its budget to Rmb 90.7 million in 2008, though interestingly FedEx is spending again this year.

The lull in advertising does not signal a change of heart for DHL, UPS, FedEx and TNT, all in their third decade in China.

China’s first courier express was EMS, founded in 1980 and in service by 1984, relying on the Universal Postal Union for overseas delivery. DHL, UPS, FedEx and TNT arrived in the mid-80s, establishing joint ventures as required by law, all of them choosing the largest logistics player, Sinotrans Group.

Today the ‘big four’ dominate the international express business. By 2006, EMS had seen its share shrink to around 20 per cent, while DHL claimed 30 to 34 per cent, FedEx 19 to 21 per cent, UPS 18 to 20 per cent and TNT seven to eight per cent, according to a 2007 study by Booz Allen Hamilton.

DHL has retained its partnership with Sinotrans until today, while UPS, FedEx and TNT realigned themselves with local players, through acquisition or partnerships, to build their domestic networks - a new opportunity since China’s entry into the World Trade Organisation in December 2001.

That is where the future lies. Domestic coverage of China is still limited to the coastal tier-one cities, but it is rapidly expanding inland, and the big four are pouring billions of dollars into the construction of logistics hubs and ground fleets. Already, the domestic courier, express and parcel (CEP) business is twice the size of the international business.

This is likely to lead to renewed marketing activity. UPS recently hired Ogilvy & Mather to handle its global ad account, with China earmarked as a key Asian market. What’s more, Malcolm Sullivan, VP marketing for Asia-Pacific at FedEx, says that the company will resume spending on ads to back its investment in lower tiers. “As the economy expands beyond the coastal areas, we are investing in infrastructure in tier-two, three and four cities,” he says. “Our marketing communications will follow, and potential users will see more advertising in these areas.”

Sullivan adds that FedEx’s activity extends beyond advertising. It sponsors the China Badminton Team, and renewed its contract in August. He adds: “By activating this sponsorship through events, we extend our brand presence and broaden our community relations in the country.”

To find out more about the market research work we do in the transport sector, please go to:

http://b2binternational.com/China/b2bsectors/transport.php

Businesses in India and China command high levels of trust among their domestic consumers, according to PR firm Edelman’s 2009 Midyear Trust Barometer.

The survey was conducted via telephone interview among 1,675 consumers (in the 25-34 and 35-64 age groups) over the summer in six countries: China, France, Germany, India, the United Kingdom and the United States.

At 75%, India recorded the highest level of trust in business out of the countries surveyed.  China followed, with 60% stating they trust business to do what is right.  48% of those interviewed in the United States trust business to do what is right, up from just 36% back in January.  Similarly, France saw a big jump, from 30% to 41%.

Unlike in previous years, when trust in business and in government tended to move in opposite directions, trust in government is now also on the rise, with a 12-point increase in the U.S. (30% to 42%) and a 13-point hike in India (42% to 55%).  Interestingly, 55% feel business hasn’t done enough to co-operate with government to solve the global economic crisis; only 38% lay this claim against government.

Trust in all the major industries surveyed went up across the six countries.  The technology sector is now 15 points ahead of the next most trusted industry – biotech/life sciences.  Banks, automotive, and insurance sectors stabilised during the period with banks being the no. 2 most trusted industry in China and India.  In the U.S.A., trust in every industry – with the exception of technology, which was already very high – experienced double-digit growth.  Trust in the pharmaceutical and auto industries each jumped significantly – from 39% to 53% and from 32% to 46% respectively.

96% of Chinese and 81% of Indians surveyed say their country is ‘headed in the right direction’, compared to 47% in America and Germany, 37% in the U.K. and 31% in France.  Furthermore, almost 70% of those in India and China rate the reputation of large multinationals as good or excellent compared to just 30% of Americans, 29% of Germans, 24% of French and a mere 13% of British.

When asked what companies could do to rebuild trust over the long term, treating employees well (94%), having transparent business practices (93%), maintaining quality products and services (93%), and communicating frequently and honestly (91%) top the list.

The public places great importance on business’s commitment to finding solutions for issues such as global warming, energy costs, and access to affordable healthcare; however, 71%, 70%, and 64% respectively feel business has not done enough to create solutions to these challenges.

China’s economy is expected to rebound robustly in the third quarter according to the State Information Centre, which has forecast an 8.5% rise in gross domestic product in the third quarter.  In the second quarter, year-on-year growth of 7.9% was reported.  The global economic downturn drove the country’s GDP growth down to 6.1% in the first quarter, the lowest quarterly rise since 1999.

In spite of the expected rebound and signs of economic recovery all round, Premier Wen Jiabao has warned that China still faces uncertainties, saying the government would maintain its macroeconomic policies.  “There are still a lot of unstable and uncertain factors ahead and the economic situation ahead is still very grave, although both the world economy and the national economy are now making positive changes,” Wen said during an inspection tour to Zhejiang province in late August.

Sources: CBBC, Xinhua, Financial Times, Wall Street Journal, FCO Country Updates and other news sources.

Better than expected economic data from China are likely to raise hopes that the world’s largest emerging economy could help to pull the rest of the world out of recession.  The National Bureau of Statistics announced an 8.9% jump in industrial output in May, compared with a 7.3% rise in April.

Sources: CBBC, Xinhua, Financial Times, Wall Street Journal, FCO Country Updates and other news sources.

In an article for the latest issue of China-Britain Business Review, Lord Davies of Abersoch, Minister of State for Trade and Investment, acknowledges that the global downturn has served to highlight the importance of emerging economies, insisting that their continuing development will prevent the world economy from entering a deeper recession this year.

There is no doubt in his mind – nor in that of many experts – that China will be a key driving force in helping the global economy to recover.  China is already the world’s third largest economy, ranks among the fastest growing, and still has massive potential for growth.  China has not and will not be completely immune to the effects of the recession, but in contrast to most countries, whose economies are expected to contract this year, even the most pessimistic projections suggest that China’s growth for 2009 will be over 6%.

From a UK perspective, China is the United Kingdom’s fastest growing major trading partner, with UK-China trade having grown at double-digit rates for the last decade.  In addition, British businesses are now the biggest European investors in China.

Britain and China have already developed excellent trade relations, and both countries and their respective economies will only benefit further from increased ties.

Market research specialists such as B2B International can conduct market entry and market assessment studies across both the UK and China – and indeed the rest of the world – which are tailored specifically to your company’s needs.  A number of organisations – UK Trade & Investment and China-Britain Business Council to name but a few – are also on hand to offer further general advice and information.

For any businesses interested in investing or expanding into China, or simply wishing to get some idea of the potential this vast country has to offer, why not contact one of our offices?

China: +86 (0)10 6515 6642, beijing@b2binternational.com 

UK: +44 (0)161 440 6000, info@b2binternational.com 

USA: +1 914 761 1909, newyork@b2binternational.com 

It seems that wherever you look articles and opinion on the world financial crisis abound, ranging from the position that we have note even seen the worst yet to “the green shoots ” view first expounded by Norman Lamont in the UK during the last major downturn to hit western economies. Being based in Beijing, the prevailing view of that we come across tends towards the optimistic. For example a recent China Daily article pointed to a survey of senior marketing managers suggesting that three quarters believed that China’s economy will recover faster than those in the west, and that a full turnaround was due within a year. Nothing particularly striking here, although it is definitely worth looking into what is being said in more local publications, and to look at what factors are causing this apparent relative optimism.

According to the People’s Daily earlier this week (see the following link in Chinese http://paper.people.com.cn/rmrb/html/2009-04/28/content_241737.htm企业业绩在回升（企稳回暖看亮点）《 人民日报 》2009年4月28日09版) there is evidence at a general level that many of China’s listed companies expect to see growth or increased profitability in their performance by the middle of this year. This improved performance is expected to be “concentrated” in construction, biomedicine, transportation, electrical, forestry, animal husbandry and fishery industries. It is almost certainly no coincidence that these industries are focused on domestic demand rather than exports and are also subject to promotional policies and the stimulus plans. These sectors are predominantly the preserve of domestic companies, including State Owned Enterprises, what then of markets with major foreign participation? Are there any reports backing some of the optimism we have heard about?

Let’s take the automotive industry, a business that by any standards is undergoing a tough time globally. The 2009 Shanghai International Auto Show that was held in April for example, featured debuts of 13 new types of car from international auto brands, a record over previous show. China’s “International Finance News” (http://finance.people.com.cn/GB/71364/9168265.html从上海车展看跨国车企“中国信心”–《国际金融报》 2009-04-21 第08版) commented that this indicates the continued strength of the Chinese auto market, currently the world’s largest.  Again, government policy received some of the credit for this dynamism, as “many senior managers have repeatedly emphasized the confidence in the Chinese market from the sound development of China’s macro-economic and macro-economic policies” as Shenyang Daily reports “我们对中国市场充满信心”《沈阳日报》2009年03月30日. Similar sentiments are found in other industries, for example Haitian, a leading plastics manufacture quoted on the specialist plastic chemicals website plaschem99 report that domestic demand has passed its trough, again stimulated by government measures. They do however point out that as around 40% of their sales are exports, the future there is hard to predict. (http://plas.chem99.com/news/545575.html –海天08年业绩衰退 但对中国市场信心满满 卓创资讯 2009-4-14 9:10:59). 

A recent article in China Daily reported that European companies in China remain optimistic and committed to the country, in spite of difficult economic trading conditions.

According to the survey conducted by the European Union Chamber of Commerce in China, most European companies (70%) represented in China have reported positive profitability for 2007.  62% expect to have remain profitable throughout 2008, when they look back at the end of the year.

The survey also indicated that SMEs in China tend to be more optimistic about future profitability than their larger counterparts. 

Joerg Wuttke, who is president of the European Chamber, commented, “This year’s survey re-confirms that the Chinese market is the most important emerging market for European businesses, and given the global slowdown it might actually rise in significance.”

It is growing domestic demand within China, rather than exports, which appears to be of fundamental importance.  More than 70% of respondents to the survey claim their principal focus is to produce goods or services for domestic consumption.  This compares with an equivalent figure of 49% two years ago.

 With two-thirds of the firms interviewed generating less than 10% of their current global revenue in China, it would appear that this country still offers massive growth potential.

However, it should be noted that the expected 62% profitability for 2008 is this survey’s lowest recorded figure, indicating that China, like so many countries, may be starting to see signs of the global economic downturn.

 Chamber members are thought to be anticipating slowdown in the automobile and services sectors, but European companies are generally positive about their prospects.

The Importance of China’s Economy

 As always, money talks – which means we might be listening to China quite a bit more in the future.

Mr. Alaric Fairbanks talks about the practical suggestions to Chinese white collar on how to deal with the global financial crisis in a recent print media interview, called Rich Weekly.  

He explains that the reasons caused the financial crisis in western markets also indicated the best way to avoid the crisis. He suggested:” Do not buy things you do not need and can not afford.”

Alaric, is the general manager of B2B International China operation. He has been living and working in China since 1994.