Luxury Brands Cut Prices in China

According to a report from the "The Wall Street Journal" website, over the years, the world's largest luxury goods companies typically make the price of luxuries sold in mainland China and Hong Kong 25-40% higher than the price in the European countries. 

The US company Bain said, luxury goods sales growth in China was under pressure, the Chinese luxury goods market size accounted for about 1/3 of the total global market size. Take the world's largest luxury goods company LVMH Group for example, in the first quarter of this year its sales in Asia decreased by 6%.

However, Chinese consumers are still buying luxury goods. They just are buying luxury goods in China. In 2014, China's domestic luxury goods sales dropped to about $ 25 billion, a dro of 11%. However, the Shanghai wealth quality research institute said that at the same time the expenditure that Chinese consumers spend on luxury goods abroad rose 9% to $ 81 billion.

Morgan Stanley estimated that in the luxury goods sales Chinese consumers created, more than half of them were achieved in the overseas market: some buy luxury goods during travel abroad, others buy luxury goods by the gray market.

This practice not only affects the luxury goods companies’ control on goods, but also hurts their business strategies in Asia.

In the earlier this year Chanel took measures to cut price in China, while increasing the price of some of Europe's flagship products, in order to reduce the price difference between the two areas. Luxury goods companies need to address the fundamental problem of pricing. Some companies are introducing luxury goods with lower prices in the Chinese market, which narrows the price difference, but does not affect existing merchandise sales.

For the luxury goods industry, the uniform price may in fact be the trend in the future. (www.chinainout.com)

 

Cross-border E-commerce Transactions Surge, Imported Goods’ Price to be Same as Other Countries’

图为万国万购保税进口商品线下体验店

Authorities forecast that China will become the world's largest cross-border B2C consumer market in five years.

By 2020, China is expected to become the world's largest cross-border B2C consumer market, China's cross-border e-commerce will drive the global cross-border consumption to grow nearly 4% on average every year. This is learned from the "Chinese cross-border e-commerce development forum" held recently. For the consumer, the price difference of imported goods through the general import trade that is disappearing and cross-border import e-commerce is expected to achieve the same price as other countries’.

Recently, Ali Institute jointly issued global cross-border B2C e-commerce trend report with Accenture in Beijing and forecast in 2020 global cross-border B2C e-commerce turnover will reach $ 994 billion, benefiting 943 million consumers worldwide.

It’s reported that, in recent years, global B2C market is growing rapidly, in the coming years it will continue to maintain an average annual growth rate of nearly 15%, from 2014 it will deal size will increase from 2014 $ 1.6 trillion to 2020 $ 3.4 trillion. Among them, the global cross-border B2C e-commerce grows rapidly.

In addition, in 2020 cross-border B2C consumers will increase to 900 million from 2014 309 million, with an annual increase of more than 21%, among them the new turnover of China and other Asia-Pacific countries tops with 53.6%.

Data shows that in 2014 China’s consumption abroad exceeded one trillion yuan, overseas visits exceeded 100 million. Insiders said that the price difference of goods through the general import trade lead people to shop abroad, while the cross-border import e-commerce is expected to change this dilemma and to achieve the same price as other countries’. (www.chinainout.com)

China Boosts Development of Cross-border E-commerce, Import and Export Commodities Bill Checked within 24 Hours

Chinese Premier Li Keqiang on June 10th chaired a State Council executive meeting in Beijing, deploying measures to promote the healthy and rapid development of cross-border e-commerce. Related measures include clearance process optimization, cross-border e-commerce exports simplification and classification, record management on operating entities and commodities, import and export commodities bill checking within 24 hours.

The meeting noted that, the promotion of cross-border e-commerce healthy and rapid development and good items imports and exports through the "Internet + trade" would be conductive to expanding consumption, promoting the upgrading and development of an open economy and creating a new economic growth point.

The meeting pointed out, first, we should optimize the clearance process, simplify and classify the cross-border e-commerce exports, implement the record and management on the operating entities and commodity, take facilitation measures on import and export commodities, such as concentrated declaration, inspection, release and bill checking within 24 hours.

Second is to implement refund and tax exemption policy of the cross-border e-commerce retail products, to encourage cross-border electronic payment, to advance payment pilot of cross-border exchange, and to support domestic bank card clearing organization to expand overseas business.

Third is to encourage foreign trade enterprises to provide integrated services like customs clearance, warehousing, financing for cross-border e-commerce, to guide enterprises to standardize their operations, and to combat illegal infringement.

Fourth, to encourage cross-border e-commerce retail export business to expand marketing channels and to cultivate its own brand and self-built platform through overseas warehouses, stores and others, cultivate its own brand and self-built platform. Meanwhile, to reasonably increase imports of consumer goods.　(www.chinainout.com)

Birth of New Reserve Currencies

Some 95 per cent of all global foreign exchange reserves are invested in just four currencies: the US dollar, the euro, the yen and sterling. The central banks of the ‘Big Four’ are all expanding their balance sheets or have been doing so for years with no sign of immediate reversal. They are all trying to convert huge debt problems into inflation problems, and when they succeed their currencies will weaken sharply.

In this currency war, EM central banks risk suffering the most collateral damage. Their reserves – so many of them held in the big four currencies – will be decimated in purchasing power terms. The world will become desperate for alternative currencies to act as replacements for the traditional reserve currencies once their currency debasement efforts really take root. 

So far, only one country, China, appears to have spotted the opportunities presented by this situation. Most others merely watch the dollar in fear.

China’s renminbi will become a global reserve currency in the not too distant future. China will benefit enormously from becoming a global reserve currency – not only will its currency become far more stable, but China will also no longer need so many reserves. The excess reserves can then be used for sovereign wealth fund purposes, including the AIIB. Finally, China will be able to increase consumption, because it no longer needs to suppress domestic demand in order to maintain high levels of reserves.

But the world will need more new reserve currencies than just the renminbi. This means that other large EM countries such as Mexico, Brazil, India and others could also benefit from the opportunity that China is now exploiting. With sensible planning and prudent policy implementation, they too can become global reserve currencies.

Technocrats in EM central banks are aware of these issues but face tremendous challenges in convincing their boards of the need to diversify into other currencies. That is why China’s move is so important. The renminbi’s ascent to reserve currency status will demonstrate the huge benefits of diversifying away from the ‘Big Four’ currencies. China will soon have to sell treasuries as its reserves become true ‘excess’ reserves. It is likely to seek to invest the cash in less mainstream currencies. Other EM central banks will ultimately reciprocate by buying renminbi. As each major EM central bank diversifies, not only will it be good for other EM currencies, it will also help all of them to reduce their excess exposures to the ‘Big Four’ QE currencies. (www.chinainout.com)

Imports Fall by 18% in May, Why Imports and Exports Fall Sharply?

Yesterday, the General Administration of Customs released the import and export data in May of this year. Last month, the import and export value reached 1.97 trillion yuan, down by 9.7%; of which exports reached 1.17 trillion yuan, down by 2.8%. Last month the imports fell unexpectedly sharply, imports amounted to 803.33 billion yuan, a decrease of 18.1%.

Sharp dro in imports caused trade surplus to expand 65%

Because of the sharp dro in imports, China's trade surplus reached 366.8 billion yuan last month, an expansion of 65%. So far, in the first five months of this year, China’s import and export value reached to 9.47 trillion yuan, down by 7.8% over last year, of which exports reached 5.4 trillion yuan, reversing the downward trend in the beginning of this year year, achieving an increase of 0.8%; however, imports fell by 17.2% to 4.07 trillion yuan, which also resulted in 1.33 one trillion yuan of China's trade surplus in the first five months.

Coal, iron ore imports fell significantly, which dragged imports off

For the last month, China's foreign trade imports fell unexpectedly, there are financial institutions noting that this year the most obvious decline appears in imports of coal, iron ore imports also decline largely, dragging down the value of imports, but also showing that the Chinese domestic demand is still weak. According to Customs data, in May China's coal imports fell sharply nearly by 30%, declined by more than 40% year on year. In the first five months of total imports amounted to 83.26 million tons, a substantial reduction of nearly 40% over the same period last year’s total imports. The main reason is the downturn domestic coal market and overcapacity squeeze the imported coal market space. In addition, imported coal’s price advantage loss ia another reason.

Further data shows that this year China’s exports to the United States and ASEAN grew, while the EU is China's largest export region, but in the first five months of this year, China-EU trade value decreased, besides import and export volume of China to Japan also fell. In the first five months, bilateral trade between China and US amounted to 1.34 trillion yuan, an increase of 2.8%, accounting for 14.2% of our total foreign trade. Of that, exports to US reached 969.09 billion yuan, an increase of 8.9%; imports from US 374.22 billion yuan, down 10.2%; trade surplus 594.87 billion yuan, expanding 25.7%. In the last five months, trades with ASEAN totaled 1.13 trillion yuan, an increase of 0.5%, 11.9% of China’s total foreign trade. Of that, exports to ASEAN 683.47 billion yuan, an increase of 9.9%; imports from ASEAN 441.87 billion yuan, down 11.3%; ASEAN trade surplus 241.6 billion yuan, expanding 95.2%.

Sino-Japanese trade decreased
And this year, Sino-Japanese trade decreased significantly, whether trade value or imports or exports decline by more than 11%. In the first five months, the trade between Mainland and Hong Kong also declined substantially, of which exports to Hong Kong fell by 9.2%; imports from Hong Kong dropped by 24.1%. (www.chinainout.com)

China WTO Tariff Protection to Expire in July 2015, China’s Door Opened Again

You know, from July 2015, WTO protection period will be over, what changes will the domestic economy will have?

1. Tariff cuts. Comprehensive tariff reductions, the average tax rate will be reduced to 17% from the 221%; the agricultural tax in five years will be reduced to 145-15%; all export subsidies will be abolished.

2. To open agricultural markets. Regarding wheat, corn, rice and cotton, China will implement "proportional tariff quota system" in order to open the markets; the state control on the trade of soybean oil will gradually undone.

3. Restrictions on US exports (including textiles) surge. Special provisions controlling China's export goods in the surge of the elimination of quotas valid for 12 years; other overseas countries to ban Chinese dumping provisions valid for 15 years.

4. To open the retail market. Foreign companies can have more distribution rights and after-sale service.

5. To open professional services. These services opened to foreign companies include legal, accounting, medical and other services.

6. To open audio and video products market. To Allow more foreign films imports, at least 20 films per year, double than the current number.

7. To open the auto industry. Automobile tariffs will be phased to be reduced from the current 80-100%, in 2006 the tarrif was 25%; it will be allowed that US organizations provide car loans.

8. To open the telecommunications industry markets to foreign investors, foreign investors will be allowed to hold 49% stake in the field of telecommunications services, and 2 years later increasing to 50%; foreign investors will be allowed to fully invest Internet market.

9. To open the securities industry. Foreign financial companies will be allowed to hold 33% stake in the fund management company.

In 2015 China must be open in all walks of life
Foreign investment will be allowed to enter into all sectors of China, including the current state-controlled mining, transportation, direct marketing and so on.
www.chinainout.com

2014 Global Wine and Spirits Market Sales Decline

According to the International Wine and Spirits Institute (IWSR) data, in 2014 the global spirits market fell by 0.1%, decreased 3.1 million boxes (9 liters). At the same time the global wine sales fell by 1.1%.

Local spirits consumption in America, Europe and the CIS decreased, Brazilian rum and Ukrainian vodka sales declined severely. In Asia-Pacific, Africa and the Middle East, local spirits consumption was still growing.

Overall, the spirits consumption in Africa and the Middle East grew fastest, local spirits reached 1.2 million boxes, imported spirits 1.5 million boxes. IWSR said it is the key area of growth and investment.

US and European markets on imported spirits continues to grow, but the growth rate slowed declines compared with 2013, whiskey and flavor spirits has become an important driving force. In fact, the whiskey is the largest growth categories, sales increasing 10 million cases in both local and export markets, India, the United States and Angola are the top three growth markets.

According to IWSR, in Europe, whiskey and gin sell well, flavored spirits and vodka did not seem to be favored by consumers.

In 2014 global wine market declined by 1.1%, losing 39.5 million boxes. imported wine consumption was flat, the local wine sales fell by 1.5%. Because of the political struggle and economic turmoil, the wine consumption of CIS declined fastest.

Similarly beer consumption declined in 2014, cider and mixed drinks sales grew. (www.chinainout.com)

MERS Hits South Korea and Its Economy

According to zaobao.com’s report on 4 June, South Korea’s MERS continues to spread, the diagnosed patient has been increasing to 30 people, two died, and nearly 1,400 people were isolated.

On the 3rd June, South Korean President Park Geun-hye chaired an emergency meeting, listened to the report on the specific circumstances, required government departments to work closely with the experts in order to find effective countermeasures as soon as possible, completely eliminate the epidemic and restore social stability.

She stressed that, "Since the first confirmed case diagnosed in Korea after, the epidemic continued to spread during two weeks, there are two deaths, so that people feel extremely uneasy, in order to prevent the epidemic into continuing to spread, the authorities are analyzing the current situation and the corresponding programs after proper analysis of the current situation and the corresponding programs, which will be open to the public. "

On 3rd June, a 50-year-old woman, who was in the isolation and observation, went to play golf with her friends. At the news of that, health authorities urged people to be vigilant and cooperate with the government's prevention work.

At present, MERS caused panic in Seoul and surrounding areas. Customers declines at the major shopping malls, cinemas and other public places, making the business of the major shopping malls downward.

Korea National Tourism Organization said that due to the increasing patients, 2500 Chinese tourists originally planned to travel to Korea, then canceled the trip, which would cause a great impact on Korean tourism.

South Korea's economic research institutes pointed out that if MERS's influence continued to spread, the South Korea's economic growth rate in the second half of this year may decline from 3% to 2%.

The South Korean government urged people to wash their hands and go to the public places with a mask. Recent sales of masks online exploded seven times, a number of pharmaceutical factories’ shares also rose by 15%. (www.chinainout.com)

China's Weak Demand Makes Copper Prices Lower

Copper fell below $6,000 on Monday, bringing a halt to a rally in May, on continued weak demand in China, the biggest consumer of the metal.

Prices for three-month delivery on the London metal Exchange touched $5,985 on Monday. The metal has fallen more than $400 from its price at the beginning of May.

There are few signs of strong orders for copper in China by cable makers and for power grid investment, despite the arrival of the traditional peak buying season.

“The downstream demand is still fairly limited, we don’t see sufficient or meaningful recovery in terms of fundamentals and sentiment has started to turn,” said Xiao Fu, an analyst at BOC International, a unit of Bank of China.

Analysts expect China’s copper demand to grow by 4 per cent this year, yet that figure is predicated on considerable use in power grid investment, based on announced government spending plans.

Power grid investment fell by 8.65 per cent in April, according to SMM, a China-based metals consultancy. In the first four months, China completed Rmb86.6bn of grid investment, 20 per cent of the planned amount for the year, it said. Last year, only 88.7 per cent of grid investment was completed.

A fall in copper stocks in warehouses tracked by the Shanghai Futures Exchange in April and May, which was taken as a sign of better demand, may also not have gone to end users, according to analysts.

“The evolution of China’s demand conditions remains the crucial issue for sentiment towards the complex in mid-2015, and neither the micro nor macro evidence for May suggests an improvement in this dynamic,” Standard Chartered wrote in a note. (www.chinainout.com)

China and South Korea Sign an FTA, China Abolishs Tariffs on 91% of All South Korean Goods

China, S.Korea sign FTA deal

China and South Korea signed a free trade agreement (FTA) in Seoul on Monday, the largest bilateral FTA deal for China in terms of trade volume.

Under the accord, South Korea will eliminate tariffs on 92% of all products from China within 20 years, while China will abolish tariffs on 91% of all South Korean goods.
Under the regulations, in 20 years at most, China’s zero-tariff goods will reach 91% of tariff lines, 85% of imports, the Korean zero-tariff goods will reach 92% of tariff lines, 91% of imports. China will reduce the tariffs of the rice cookers, washing machines, refrigerators, medical equipment, appliance parts and other products to zero. South Korea will phase out the tariffs of motors and transformers, and phase out the tariffs of the handbags, golf clubs and other large household items imported from China in 15-20 years.

The countries began talks in May 2012 which covered 17 areas, including trade in goods and services, investment and trade rules as well as e-commerce and government procurement. (www.chinainout.com)

China Reduces Tariff to Promote Domestic Demand

Recently, the state authorities announced that from June 1, 2015, some consumer goods import tariffs would be reduced by more than 50% on average.

To reduce some consumer goods import tariff rates, it appears to be detrimental to the economic interests, but it is actually wise to promote domestic demand, but also a social consensus obtained in practice.

China Tourism Research Institute statistics show that China's outbound tourism trends in recent years show a substantial increase, overseas spending 20,000 yuan per capita, the proportion for shopping about 58%. Chinese people overseas shopping led to the capital outflow, so that our annual inbound and outbound tourism trade deficit exceeded 100 billion US dollars, which is not conducive to boost domestic demand and expand consumption, but not conducive to economic restructuring and upgrading.

Chinese people are keen to sweep goods overseas, which is a result of many complex reasons, unsound consumer market is an important factor, lack of brand building and counterfeit products seriously affect people's consumption enthusiasm. The more immediate reason is the high import tariffs on luxury goods and the undeveloped duty-free shopping level. Studies have shown that if the consumer goods import tariffs decrease by 10 percent, funding for overseas shopping will be returning 300 billion yuan. At the same time, the reduction of tariffs can attract more foreign brands into China, and can also promote domestic enterprises to further change the mode of operation and adjust the product structure.

It can be seen China is determined to reduce the tariff. At present, the economic is under downturn pressure, boosting domestic demand and promoting consumption is the key to economic growth and structural adjustment.(www.chinainout.com)