China's Economy Has Sufficient Power to Maintain Growth

"In the next five to ten years, the Chinese economy will have sufficient power to maintain rapid growth." Nicholas Lardy, a Senior Fellow from Peterson Institute for International Economics, recently told the "Economic Daily" reporter when participating in the British Royal Institute of International conference.

First Lardy made clear that he hold a highly optimistic attitude on China's economic growth. Lardy said that in China’s former reform process, market plays a more important role in the allocating resources. One of the most noteworthy phenomenon is the rapid development of the private sector. From the beginning of reform and open, the private sector developed from scratch, and rapidly increase in terms of volume and quality. Currently, the private sector has become the main source of China's economic growth, employment and investment increase. He believes this is an indispensable factor in China's economic success. Although the current Chinese economy entered a period of structural adjustment, but the development trend of the private sector has not changed, instead, its development has been enhanced to some degree. This will provide the impetus and support for China's future economic growth.

On the future development of China's private economy, Lardy believed that the current government's economic reform in China provided a huge space and incentives. First, the Chinese government further lowered the threshold of private enterprise establishment. Lardy believed that the Chinese government has not only simplified the administrative procedures to create a company in China, but canceled the limitation of a company's minimum registered capital. The Chinese government made a lot of policy adjustments and reforms to reduce administrative examination and approval, and encourage private sector development, which provided a favorable policy environment for the further rapid development of the private economy. Affected by this, in the past two years, a large number of newly registered private enterprises began to emerge in China.

Meanwhile, as China has made efforts to "Develop Mixed Ownership Economy", private sector development space will also be further expanded. Lardy believed that the current Chinese state-owned enterprises occupy important position in the energy, financial and telecommunications sectors, but this is changing and the change is favorable to the private sector. At present, more and more industrial sectors began to open to the private sector. Lardy also told the reporter in an interview that Chinese Private Enterprises had huge space for development. The rapid development of the private sector in the future will further enhance allocative efficiency of the economic factors, the return on capital and the efficiency of state-owned enterprises. This means that the total output of China's economy and overall labor productivity will be significantly enhanced in the future.

Lardy stressed that in the reform process over the past 30 years, the Chinese government continued to enhance the role of market in resource allocation, China's still in the reform process currently. under the circumstances that the private sector’s ROI and production efficiency has been improved significantly, the reform provides power and space for the development of the private sector. Therefore, China has the ability to maintain labor productivity and efficiency of all economic sectors, China won’t fall into the so-called "middle income trap", but will enter the ranks of high-income countries, after a new round of rapid growth in the future. (www.chinainout.com)

Commodities Crumble, International Crude Oil Prices drop back to Level of 10 Years Ago

From the second half of 2014, commodity price continued to decline, in the first half of this year 2015, the price is still down, many kinds of commodities are at a low price, for example, in the industries like energy, chemicals, rubber, textile, nonferrous metals, steel, agricultural products and building materials, the industry index is lowest since 2011; the prices of iron ore and rebar turn lowest in recent ten years, the international crude oil prices slump, falling to $40, almost dropping back to the level of 10 years ago.

The "2015 January to June China’s commodity economic data Report" (hereinafter "Report") from Commodity Data Business Community shows that in the first half of 2015 commodity price index (BPI) ends with 760 points and falls by 20 points, compared to the early of this year.

However, some market participants found something optimistic from the monthly trend.

Down trend has not changed, but the market opportunity appears

According to the report of the business community, although in the first half of this year the commodity trend is still not satisfactory, but after a slump in the second half of last year, in the first half of this year, the market is showing obvious upward momentum. It is reported that in the first half the commodity supply and demand index (BCI) is -0.18 on average, average monthly increase is -0.31%, which is a good performance in the past three years. (www.chinainout.com)

Euro Depreciation & Zero Tariff: Beer Imports Soar 11 Times

It’s told from Zhejiang Inspection and Quarantine Bureau that from January to June this year, at Zhejiang ports (except Ningbo) beer imports reached 8623 tons, with the value of $ 9,780,000, respectively, increase of 11 times and 5.3 times year on year, the growing rate of beer is far more than that of the imported wine.

It is understood that alcohol and maltose content of European beers are often higher than that of domestic beer, and European beers have better taste, more and more Chinese consumers like to drink imported beer. "Good beer of imported brand is very popular, or even we have no enough beer to sell." a Wenzhou trading company principal Chen Xiaoyong said.

Chen believes that the rapid growth of beer imports and sales is closely related to the continued depreciation of the euro. Since last year, the euro depreciated by about 18%, that is to say, the price of imported European beer has a discount of nearly 20%. imported beer price in the domestic market is down by 40% or 50%, in the past the high-end beer sells at about 300 yuan, now sells at more than 100 yuan, the wholesale price of the low-end originally was less than 10 yuan, now generally 4 to 5 yuan, equal to the domestic brands of beer prices.

Insiders believe that this year, the overall export situation is grim, many exporters turn to do the import trade. According to Chen Xiaoyong, many Wenzhou’s local export traders start the import beer business, now the beer importers reached to more than 40, while last year the number was less than 10. He said importers increased by 3 times, the amount of imported beer naturally multiplied. He expected in the second half imports of beer would still increase, his company planned to import beers of about $10 million this year.

In recent years, Wenzhou Inspection and Quarantine Bureau takes various measures to promote growth in imports, makes the imported food clearance shortened from 15 weekdays to three weekdays, reduces the frequency and quantity of testing, improve the efficiency of customs clearance, and effectively reduce the cost of imports. compared to wine, beer has a advantage of "zero tariff", allowing more importers to scramble for imported beer. (www.chinainout.com)

Zhengzhou-European Trains First Connect Japan Korea to Europe on "Silk Road Economic Belt"

郑欧班列
 

Zhengzhou-European trains is the first public international freight trains connecting Japan, Korea to Europe on the Silk Road economic belt.

On July 18, 2013, for the first time, Zhengzhou-Europe trains started from Zhengzhou, in 11 half days, via Kazakhstan, Russia, Belarus, Poland, Germany, reached in the terminal Hamburg, Germany. Every Wednesday, Friday, there is a train on time departing from Zhengzhou to Hamburg, every Thursday, Saturday, there is a train from Hamburg to Zhengzhou.

Zhengzhou-European trains are safe, stable and efficient, and attracted some of the Japanese and South Korean companies. since 2015, Zhengzhou-European trains pioneered the "Highroad - Sea - Air - Railway" international multimodal transport mode, especially providing transshipment service for Japanese and Korean cargo shipped to Europe through Zhengzhou, to become an important binding tie between the Silk Road economic belt and the Marine Silk road.

Zhengzhou-European trains initiate "international multimodal logistics model", which attracted the attention of the Chinese Ministry of Transport and the General Administration of Customs. Currently two authoritative have identified, based on the Zhengzhou International land port, we’ll build the central region's largest "International Intermodal Center" to make the relevant international freight procedures more convenient and efficient.

Zhengzhou is a transport junction of China's railway, highway and high-speed railway, short logistics transport distance and low cost, is a key factor for Zhengzhou-European trains to become China's current leader in 21 sino-European trains.

It is understood that Zhengzhou-European trains continue to explore new innovative economic cooperation with countries alongside the silk road economic belt, thus expanding the radius of the distribution of goods, in addition to Zhengzhou - Hamburg line, in 2015 Zhengzhou-European trains also increase Zhengzhou - Almaty line and Zhengzhou - Moscow line. (www.chinainout.com)

China Benefits from Commodity Price Collapse

China’s economy would have expanded at less than 6 per cent in the first quarter if not for the collapse in global commodity prices, according to data reviewed by the Financial Times, raising concerns about the government’s ability to hit its 7 per cent growth target for the full year.

At its first-quarter briefing in April, the National Bureau of Statistics reported that gross domestic product had increased 7 per cent but did not provide a breakdown of the growth figure into its three components — consumption, investment and net exports.

The Chinese government has been trying to boost consumption while weaning the economy off its traditional reliance on credit-fuelled investment. The net export figure, which boosts growth when China enjoys an overall surplus with its trading partners, has traditionally had a much more modest impact on output.

According to a breakdown of China’s first-quarter GDP figure that has only recently become available, net exports contributed 1.3 percentage points of the country’s seven per cent growth. By comparison, net exports accounted for just 0.1 percentage points of the 7.4 per cent growth figure reported for 2014 — China’s slowest annual rate of expansion in a quarter century.

Consumption and investment, meanwhile, accounted for 4.5 and 1.2 percentage points of first-quarter growth respectively. Without the 1.3 percentage point boost from net exports, China’s first-quarter growth figure would have been much lower at about 5.7 per cent.

“It’s quite worrisome,” said Bo Zhuang, China economist at consultancy Trusted Sources. “That’s why the government’s policies have been much more aggressive [over recent months].”

The Chinese government, which will release its second-quarter GDP estimate next week, has cut interest rates four times since November in a bid to keep growth steady at about 7 per cent. (www.chinainout.com)

Four Methods of Business Model Innovation（2）

As IBM Business Institute and Harvard Business School professor Christensen said, a company's business model is the basic method of doing business), which contains four parts: customer value proposition, profit formula, value chain location, key resources & processes.

Business model innovation is to change the basic operation methods of enterprises. In general, there are four ways: the revenue model innovation, enterprise model changing, the industry model innovation, and technology-driven innovation.

To change the enterprise model is to change the role that an enterprise plays in the industrial chain, that is, to change the match between "make" and "buy". In general, this change is achieved through vertical integration or sale and outsourcing. For example, Google realizes people obtain information from Desktop to the mobile platform, as a desktop search engine, it will gradually lose its competitive edge on the implementation of vertical integration, thus Google makes acquisition of Motorola mobile phones and mobile platform Android operating system, entering the mobile field platform, changing its position in the industrial chain and business model.

Changing industry model is the most radical business model innovation, which requires a company to redefine this industry, enter or create a new industry. For example, IBM promotes Smart Planet Initiative and cloud computing, re-integrates resources, enters new areas and creates new industries, such as business process outsourcing and business transformation services, IMB strives to become the steward of the overall enterprise business operations. It’s the same with Amazon, its ongoing business model innovation chain extends rearward, such as providing business users with Business Infrastructure Services such as logistics and information technology, opening their own 20 global cargo distribution centers, and vigorously entering cloud computing, finally becoming the leaders providing relevant platforms, software and services.

The fourth method is to change the technical mode. As product innovation is often the main driving force of business model innovation, technological change as well. Enterprises can introduce radical technologies to lead their business model innovation, likewise, many companies use the Internet for business model innovation. Today, the most promising technology is cloud computing, which provides many new user value, thus providing opportunities to make enterprise business model innovation. (www.chinainout.com)

Four Methods of Business Model Innovation

As IBM Business Institute and Harvard Business School professor Christensen said, a company's business model is the basic method of doing business), which contains four parts: customer value proposition, profit formula, value chain location, key resources & processes.

Business model innovation is to change the basic operation methods of enterprises. In general, there are four ways: the revenue model innovation, enterprise model changing, the industry model innovation, and technology-driven innovation.

To change the revenue model is to change the definition of an enterprise’s customer value and the corresponding profit equation or revenue model. This requires companies to determine the user's new demands from the start. This is not looking for the new demands of users in the marketing category, but redefining the user needs in a more macro level, which is a deep understanding of what tasks users need to accomplish or what goals users want to achieve when buying your product. In fact, when users complete a task, they require not only the product, but a solution. once /confirm/ied, this solution will determine the new user-defined value, and turn the business model innovation.

From this point, Internationally renowned drill enterprises company Hilti to find the new users’ needs and re-confirm the user-defined value. Hilti has been providing a wide range of high-end industry drills for the construction industry, but in recent years, global competition makes drills become low-interest standard commodity. Thus, by focusing on what needs to be done by users, Hilti realized that what users really want is not a drill, but to get a drill in the best state at the right time and place. However, users have no enough integrated management capabilities of a large number of complex drills, which often results in schedule delays. Accordingly, Hilti immediately changes its user-defined value, no longer sells but rents drill, provides integrated management services such as drill inventory, repair and maintenance. Hilti changes its business model from the hardware manufacturer into a service provider, transfers manufacturing to third parties, and changes the profit model. Dell, Wal-Mart, Dow Corning, Zara, Netflix and Ryanair all make commercial model innovation like this. (www.chinainout.com)