January 2010

Quarterly Issue No: 1/2010

NEWSLETTER

This Newsletter is distributed quarterly, free-of-charge, to clients of International Business Center (IBC), and to other parties that have requested it. It is essentially newsworthy items regarding trade in Hong Kong and China, as well as IBC specific news.

CONTENTS

News from IBC
Export Slump Eases as Demand Revives
World’s Biggest Textile Centre to Get Better
Mercedes-Benz: China Sales to Surpass UK, then US
Spanish Vineyards Target China’s Wine Drinkers
EU Investigates Implementation of Batteries Directive
China's Foreign Trade to Grow 15% Next Year: Report

 

NEWS FROM IBC

Hong Kong Holidays

Public holidays this quarter are:

01 January   New Year Day
13-16 February Chinese New Year

IBC Announcement

The IBC Group has been steadily expanding our business scope over the past year. We now have more companies set up as IBC’s subsidiaries specifically structured to cope with the developing needs of our clients. In 2009 the following new companies have been added to our group:

  • IBC Consulting Limited – focuses on providing the best corporate finance related services to our clients. Services include corporate restructuring, debt restructuring, tax planning, pre IPO and corporate finance related restructuring and supporting work, pre IPO private placement, company set up – HK, BVI, PRC (tailor made or ready made), source from or acquire target companies in Mainland China, accounting services and Company Secretary services, etc..
  • IBC Certified Public Accountants Limited - a firm dedicated to providing professional services, helping clients to develop their businesses. Playing the role as business advisers to make sure the clients are always safe in the knowledge that their financial commitments and responsibilities are taken care of. Services including accounting services, company auditing services and taxation, etc.
  • IBC Credit Limited - provides financing services to individuals in order to fulfill their financial needs. Services such as personal loan, second mortgages for car park, residential and commercial properties, as well as tax loan. We always understand the clients’ needs and tailor-make the most suitable financial solutions to them.
  • IBC Online Services Limited – specializes in providing business data storage, back up and retrieval solution to Hong Kong SME and other business entities.
  • IBC Immigration Limited – advisory services to clients on investment migration to Hong Kong, Macau and Singapore.

Trade shows in Hong Kong in 1st quarter 2010

Events Date
- HKTDC Hong Kong International Licensing Show 11-13 Jan 2010
- HKTDC Hong Kong Toys & Games Fair 11-14 Jan 2010
- Hong Kong International Stationery Fair 11-14 Jan 2010
- HKTDC Hong Kong Baby Products Fair 11-14 Jan 2010
- HKTDC Hong Kong Fashion Week for Fall/Winter 18-21 Jan 2010
- HKTDC World Boutique, Hong Kong 18-21 Jan 2010
- HKTDC Education & Careers Expo 4-7 Feb 2010
- HKTDC Hong Kong International Jewellery Show 5-9 Mar 2010
- Hong Kong International Film & TV Market (FILMART) 22-25 Mar 2010

 

Export Slump Eases as Demand Revives


A woman working at a textile factory in Huaibei City, Anhui Province. China's exports are likely to remain sluggish next year and may inch up slowly in the months ahead. [China Daily]

China's exports fell at a much slower pace in November, the smallest decline this year as recoveries in the US and Europe helped revive demand, according to statistics released by the Customs department on Friday.

Exports fell by merely 1.2 percent last month to $113.65 billion over the same period last year, compared with the 13.8 percent decline in October. Imports also rebounded strongly, rising 26.7 percent over the same month last year to $94.56 billion, compared with the 6.4 percent decline in October. The nation's trade also climbed 9.8 percent from a year earlier.

"There has been considerable improvement, but it is still below forecasts," said Denise Yam, economist with Morgan Stanley Asia.

"The stronger performance (of exports and imports) has been due to the growing demand from overseas, and the low reference point of last year," said Dong Xian'an, chief economist with Shanghai-based Industrial Securities.

In November 2008, the nation recorded its first year-on-year decline in exports and imports, largely due to the global financial crisis.

In the third quarter of this year, the US economy registered its first year-on-year growth since late 2008. The latest figures also show that the Euro Zone economy has grown by 0.4 percent from July to September, a signal that the regions are finally shrugging off the recession blues.

The only gloom that looms on the horizon is the hazy short-term outlook for overseas demand. Federal Reserve Chairman Ben S. Bernanke recently indicated that "tight credit" and "high unemployment" continue to weigh on the US economy.

"Exports may continue to be sluggish and inch up slowly in the months ahead, and probably record positive growth in December," said Li Wei, economist with Standard Chartered.

Both Standard Chartered and Industrial Securities are of the view that China's exports would grow by 10 percent in the first quarter of 2010.

Imports have been outperforming exports in the past few months. "The strong demand for commodities is eyeball-catching, and the momentum would continue," said Li.

Imports of crude oil, iron ore, copper and refined petroleum products have been the major drivers for November, surging 28, 8.3, 57.8 and 47.7 percent in value. Imports of plastics and motor vehicles also jumped 58.1 and 74.7 percent.

But with the government's efforts to boost domestic consumption taking off, import growth during the first quarter of next year may remain stagnant at 20 percent, said Industrial Securities.

The sharp improvement would also increase the calls for Yuan revaluation, feel analysts.

Premier Wen Jiabao said recently that such calls are "unfair" as China faces rising protectionism and a stable Yuan would be beneficial to global recovery.

According to figures from the Ministry of Commerce, nearly 101 trade-remedy investigations have been filed against China by 19 countries, involving sales of over $11 billion.

Wang Chao, Assistant Minister of Commerce, said China would strive to enhance its industrial competitiveness by leveraging its hi-tech prowess and also help brands to battle trade disputes.

Sources: China Daily

 

World's Biggest Textile Centre to Get Better

"Keqiao seeks to be a global textile centre," declares Zhou Rusheng, Chairman of the China Textile City Construction and Management Committee.

China Textile City offers the world's largest variety of fabrics, home and industrial textiles. The next step is to upgrade.

Already, the Textile City provides the largest distribution centre for textiles in China. It's also the largest specialised textile market in Asia and the largest textile trading centre globally.

There are over 20,000 shops and 19,000 trading companies dealing in fabrics of nearly all kinds. It's visited by 100,000 people daily and products are sold in 187 countries and regions.

China Textile City attracts buyers from around the world

In fact, a quarter of global trade in textiles takes place through the market, which has ties with nearly half of all textile enterprises in the country. Annual turnover at Textile City exceeds Rmb60 billion.

As Zhou Rusheng says, there are five major textile centres in the world and they are all in other countries. China has the largest textile output, but it can't compete where it comes to brands and technology.

For example, CK, a US brand, uses fabrics sourced from China Textile City and can sell undergarments costing just over Rmb10 and up to hundreds of yuan per unit.

Textile enterprises in Shaoxing have first-rate equipment, but their technologies still need improvement. They have to work on technological and brand innovation, according to industry observers.

Some textile enterprises are beginning to realise the importance of brand competition. With the government attaching increasing importance to this, the city implemented a new mode of corporate management with emphasis on protection of intellectual property rights, guidance for the fostering of technological innovation, brand-building, fashion creation and integration of industrial chains, and achieved good results.

"With the completion of supply chains in such fields as design, production and marketing, Keqiao is set to become a global textile centre," says Zhou Rusheng.

"The world looks to China, China looks to Zhejiang and Zhejiang looks to Keqiao in the textile industry" - that's the catchword of the Keqiao China Textile City.

© Hong Kong Trade Development Council

 

Mercedes-Benz: China Sales to Surpass UK, then US

The S-Class has found its biggest fans in China, where 12,500 units of the model were sold in the first 11 months of this year, the most of any market in the world.

Due to robust sales in the world's most populous country, Mercedes-Benz expects China to unseat the United Kingdom (UK) as the company's third-largest passenger car market in the world in 2010.

Joachim Schmidt, executive vice-president of Mercedes-Benz Cars for sales and marketing, told China Daily last week that China would then soon supplant the United States for the No 2 spot.

"I personally believe that China will surpass the United States within two or three years," Schmidt said.

China now is the luxury carmaker's fourth-biggest market after Germany, the US and UK.

He said Mercedes-Benz expects to sell around 100,000 cars on the Chinese mainland next year.

Klaus Maier, president and CEO of Mercedes-Benz China Ltd, said recently that the company's mainland sales would reach 65,000 cars this year, up 65 percent from 2008.

Mercedes-Benz's sales on the mainland surged 68 percent in the first 11 months to 59,200 units, including 12,500 units of the S-Class, 6,400 new-generation E-Class cars, 14,500 locally produced C-Class vehicles and 14,000 SUVs.

Strong S-Class sales have made China the world's biggest market for the model.

In November alone, Mercedes-Benz's mainland sales hit an all-time monthly record of 8,500 cars, rocketing 224 percent from a year ago.

"The luxury car market in China will continue dynamic growth for a few years thanks to the country's steady economic growth," Schmidt said.

He said Mercedes-Benz plans to launch 16 all-new car models in the next two years globally, most of which will be introduced into the Chinese market to meet growing demand.

The company will launch extended-wheelbase E-Class sedans in the middle of next year at its parent Daimler AG's joint venture with Beijing Automotive Industry Holding Corp.

The tie-up now is making the C-Class.

Analysts said the extended-wheelbase E-Class will help Mercedes-Benz boost sales in China considerably as Chinese buyers prefer roomier sedans. Rivals Audi, BMW and even Volvo have already launched long-wheelbase models in China.

Daimler and Beijing Automotive plan to increase annual production capacity of the joint venture to 75,000 or even 100,000 units in the near future from 30,000 at present.

Mercedes-Benz is also expected to launch its E-Class Cabriolet convertible, which made its global debut last week in Dubai of United Arab Emirates, as an import in China next year.

Schmidt said Mercedes-Benz plans to increase the number of its authorized dealerships in the Chinese mainland to more than 200 in a few years from 141 at present to facilitate its sales growth.

The company aims to boost its global sales to 1.5 million cars a year by 2015, up from 1.25 million units last year, he said.

Eyeing huge growth potential in China, other luxury carmakers are also stepping up production in China.

Audi, the current leader in China's luxury car market, opened a new 100,000-unit assembly plant in Jilin province in September, doubling its annual production capacity to 200,000 units.

BMW announced last month that it plans to increase its production capacity in China to 300,000 units a year in the long term, up from 41,000 units at present.

In the next two or three years, BMW's production capacity in China will grow to 100,000 units.

Sources: China Daily

 

Spanish Vineyards Target China's Wine Drinkers

According to Robert Tinlot, Honorary General Manager of Spain's International Organisation of Vine and Wine (OIV), China is set to eventually become the world's premier consumer market for wines and is already the fastest growing globally. He sees Hong Kong as the strategic gateway to unlocking that vast potential market, with the territory an established centre for wines in its own right.

The Spanish Wine Market Observatory (OEMV) shows wines exported to Hong Kong soared 80% in value to Euros300 million in the year to April 2009, rising 31% in sales.

That was mainly down to Hong Kong's abolition of its 40% duty on wine in February 2008, allowing global players to take advantage of the territory's logistics, finance and infrastructure capabilities to set up wine trades.

Wines to the people: capturing a new market.

However, Spanish vineyards and distributors currently rank eighth as wine traders into Hong Kong, well behind market leaders France and the UK. The Director General of OEMV, Rafael del Rey, sees that position changing with Spanish companies more often holding presentations, tastings and symposia to increase their commercial networks.

Spanish distributors are prioritising their target markets as Hong Kong, Singapore and Chinese mainland coastal cities in Asia, as these have more progressive lifestyles and consumers possess greater discretionary purchasing power.

Wines from Spain could penetrate both the Chinese mainland quality and mass markets. Spanish distributors also expect to build sales for re-distribution from China to the rest of the region under different pricing approaches.

Spanish wines underperforming

The UK's Wine Intelligence research company estimates that Spanish wines are consumed by 42 million drinkers in the US, the UK, Germany, Belgium, Switzerland and the Netherlands - but that means that 100 million consumers have not tasted Spanish wines in these developed markets, leaving a huge potential for growth.

At the same time, many consumers globally are not aware of the diversity of Spanish wines nor have a studied view as to their merits, since Spanish brands are less well developed.

That doesn't imply individual Spanish wines have not entered the lexicon for excellent quality. When wine lovers around the world talk about Spanish wine, the name Rioja invariably appears. This protected denomination of origin (PDO) has received international recognition.

However, there's a wide range of wines throughout the entire portfolio of Spanish vineyards that offer individual qualities, such as Cava of Penedes and wines from Catalonia, the Ribeiro and Albariños in Galicia.

Denominations of origin include brands such as Ribera del Duero, Toro or Rueda in Castile; Valdepeñas in La Mancha; Jumilla in Murcia; Carinena in Aragon; Utiel-Requena in the Valencian Community and the fine Andalucian wines such as Montilla-Moriles and Jerez de la Frontera.

Luxury Emita wine at Euros1,245 per bottle.

Spanish sparkling wines, Cava, have particularly shown strong sales growth despite being affected by the sales of French champagne at very high prices. Sparkling Spanish wine exports grew 22% in 2007 and 143 million litres was shipped, worth Euros435 million. Some experts consider this sector to appeal particularly to Chinese mainland drinkers, due to the wine's celebratory aspect.

The US is considered to be where there are good shorter term opportunities for Spanish wine's consumption growth, with the US an ever expanding market of 60 million consumers. Over 2% sales growth was reported in 2008, very similar to 2007, and mainly due to young people becoming interested in Spanish wines.

Italy, Portugal and France are seen as Spain's current bulk markets, as well as China, South Korea and Japan in Asia. In Asia there was a noticeable increase in sales of sparkling and table wines. Other European markets such as Belgium, Germany and Ireland have evolved positively too.

One of the foremost Spanish wine distributors in Asia is Torres, founded in 1870 with headquarters in Vilafranca del Penedès (near Barcelona) with vineyards also in other zones such as La Rioja, Toro, Jumilla or Ribera del Duero, as well as in Chile and California, the US.

Other wines sold under the Torres brand are Viña Sol, Sangre de Toro, De Casta, Coronas, Atrium and Viña Esmeralda.
Among brandies, the brands Torres 5, Torres 10 and Torres 20 are well known and are considered among the best brands worldwide. Torres wines are exported to over 140 countries.

Another coming export to Asia is Spanish sherry. Says Francisco Valencia, President of Marco de Jerez wine cellars: "sherry is particularly relevant to Chinese cuisine. It is very often preferred by Chinese chefs, since dry wines are too acidic."

© Hong Kong Trade Development Council

 

EU Investigates Implementation of Batteries Directive

On 27 November 2009, a Commission Decision establishing a questionnaire concerning implementation in the Member States of the Batteries Directive, 2006/66/EC, was published in the Official Journal of the EU. Hong Kong traders who import batteries or battery-using products into the EU should take note of this development, as the responses to this questionnaire will inform the Commission as to whether the measures which are currently in place are effective, and will likely contribute to future policy decisions in this area.

Member States have been asked to provide information on the following points, amongst others:

  • information on the transposition of the Batteries Directive into national law;
  • the steps which have been taken to increase the environmental performance of batteries and accumulators;
  • the collection targets for batteries and accumulators and whether these have been met;
  • treatment and recycling measures which have been put in place;
  • financing agreements and the measures which have been taken to ensure that the collection, treatment and recycling of all waste batteries and accumulators is financed by producers or third parties acting on their behalf, as well as the measures taken to ensure that producers are not being double-charged where alternative collection schemes are already in place; and
  • inspections and enforcement, including how many cases of non-compliance have been established and whether any non-compliant products have been removed from the national market.

As traders may be aware, the Batteries Directive was scheduled to be implemented in all Member States by 26 September 2008. The obligations set out under the Directive apply to all types of batteries, whether these are intended for consumer goods, industrial use or vehicles. The Directive prohibited the following, as from 26 September 2008:

  • all batteries and accumulators, whether or not incorporated in appliances, containing more than 0.0005% of mercury by weight (except for button cells, which must have a mercury content of no more than 2% by weight);
  • and portable batteries and accumulators, including those incorporated in appliances, with a cadmium content by weight of more than 0.002% (except for portable batteries and accumulators for use in emergency and alarm systems including emergency lighting, medical equipment, or cordless power tools).

To ensure that a high proportion of spent batteries and accumulators are recycled, Member States must take whatever measures are needed (including economic instruments) to promote and maximise separate waste collections and prevent batteries and accumulators from being discarded as unsorted waste. Member States are also required to make arrangements enabling end-users to discard spent batteries and accumulators at collection points in their vicinity and have them taken back at no charge by the producers. Collection rates of at least 25% and 45% have to be reached by 26 September 2012 and 26 September 2016 respectively.

Hong Kong’s manufacturers also have to meet the Directive’s labelling requirements, including for batteries that are incorporated or embedded in appliances, if they wish to sell their products in the EU:

  • the symbol of a crossed-out wheeled bin, for all batteries;
  • the chemical symbol for the metal concerned – Hg, Cd or Pb – for batteries, accumulators and button cells containing more than 0.0005 % mercury, more than 0.002 % cadmium or more than 0.004 % lead;
  • the capacity of all portable and automotive batteries and accumulators.

The Batteries Directive furthermore lays down recycling requirements for spent batteries. Importers of Hong Kong’s batteries and appliances containing them will also know that they are obliged to register in each EU Member State where they place batteries on the market. A producer is any person who supplies or makes available to a third party batteries or accumulators (including those incorporated in appliances or vehicles) within the territory of that Member State, for the first time on a professional basis.

The Batteries Directive sets minimum rules for the functioning of national battery collection and recycling schemes, in particular with respect to the financing of these schemes by producers. Fortunately, Member States have to ensure that any financing requirement for collection, treatment and recycling avoids double charging of producers who are already liable for financing under the EU’s WEEE Directive and end-of-life vehicles Directive.

A copy of the Batteries Directive can be found via the following link:
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2006:266:0001:0014:EN:PDF


A copy of the questionnaire on the implementation of the Batteries Directive can be found at:
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2009:312:0056:0058:EN:PDF

© Hong Kong Trade Development Council

 

China's Foreign Trade to Grow 15% Next Year: Report

China's foreign trade is projected to grow 15 percent next year, according to a report released by the China Institute for WTO Studies on Friday (18 December 2009).

The report forecasts imports to increase by 15 percent and exports up 13 percent.

With the external demand improving and the global economic recovery gaining momentum, "the declining trend of China's exports would come to an end next year," the report says.

The government stimulus package would boost imports through enhancing domestic demand, while the growing competitiveness of Chinese enterprises in the international market would increase exports, said Zhang Hanlin, head of the institute based in the University of International Business and Economics.

Net exports would contribute 0.3 percent to China's GDP growth next year, said Zhang, compared with a minus 4.4 percent this year as predicted by the World Bank in a recent report.

In the first 11 months this year, China's imports and exports totaled $1.96 trillion, down 17.5 percent compared with the corresponding period last year, according to the General Administration of Customs.

Exports dropped 1.2 percent year-on-year in November, but were up 2.6 percent from October, the fifth consecutive monthly increase. And imports rose 26.7 percent from year-on-year.

However, the China Institute for WTO Studies report also warns of rising protectionism against Chinese products in 2010.

Faced with worsening unemployment situation and shrinking market share, some countries tended to make China a scapegoat, said Zhang. "China will suffer from more trade frictions in the years to come."

The report says, in the first nine months this year, 19 countries has launched 88 trade remedy investigations against China, involving $10 billion, a year-on-year rise of 125 percent.

China suffered 14 trade remedy investigations from the United States, involving $5.84 billion, or 639 percent more than that of the corresponding period last year.

Some countries might resort to new remedy measures which are often in disguised forms but with more destructive effects, Zhang said.

Sources: China Daily

 

Disclaimer

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