Relocation of Factories in China
January 14, 2009
Chinese factories is in process of relocation toward the second and third tier cities to cut costs and reinforce competitiveness. Here is one example for the process:
To broaden sources of income and reduce expenditure, Taiwan-based technology manufacturing group Hon Hai Precision Industry Company is planning to implement large-scale employee relocations to third-tier Chinese mainland cities that can offer preferential tax policies in addition to reducing its operating budget for 2009 by 20%.
According to reports from Taiwan local media, the company, which is the parent company of Foxconn, will reduce the number of its employees in the Shenzhen Longhua plant from 260,000 to 100,000 and will transfer its focus to inland areas such as Wuhan, Hubei province and Jincheng, Shanxi province. Edmung Ding, a spokesperson from Hon Hai, said facing the severe global economic situation, Hon Hai started to re-deploy its human resources around China two years ago.
But Ding points out that the company has no layoff plan in its Longhua plant, contrary to news from published reports. In addition, he emphasizes that the 20% budget reduction will be carried out in accordance with the actual situations of different units and will not be enforced under a unified standard.
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Attention to VAT Rebate Changes!
December 29, 2008
We want to redraw attention to the newly adjusted VAT rabates again. Because a total of 3,770 items, in the third export tax rebate increase this year, is put into affect in December.
The items involved include labor-intensive, mechanical and electrical products.
So those buying from China is better to learn whether there is a change for their products. Buyers can decrease their buying prices if there is are tax rebate increase on their items. Because, an export rebate increase means a decrease in the manufacturer’s total costs.
Rises in tax rebate rates varied among different items. For example, the rate on tires was raised from 5 to 9 percent while glassware was up 5 to 11 percent. Rates on labor-intensive products such as luggage, shoes and umbrellas were elevated from 11 to 13 percent.
The 3,770 items accounted for 27.9 percent of the country’s total exports.
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Will Yuan Depreciate against USD?
December 19, 2008
As the Chinese currency yuan or renminbi appreciated all over 2 years and those buying from China directly felt the rising costs of purchases since the stronger Yuan made the Chinese exports more expensive.
Nearly, for the last 6 months, the currency rate is stabilized at 6.80′s level. However, as the global crisis hit the Chinese economy, there is now the possibility for Yuan’s depreciation. But it is actually very hard because as the rest of the world have deep problems, a China making exports cheaper could or would give way to protectionist reactions against Chinese imports, especially in USA and EU.
Here is Shanghai Daily news about the debate over the depreciation:
ECONOMISTS are divided on the yuan’s movement next year.
Liao Qun, CITIC Ka Wah Bank chief economist, said yesterday he expects the yuan to appreciate 2 percent to 4 percent next year, a “moderate appreciation.” “From a mid and long-term view, the trend of yuan appreciation is irreversible as China continues to integrate with the global economy,” Liao said.
The currency has appreciated 6 percent this year against the United States dollar in the first half with its momentum on hold in the second half after a moderate depreciation in recent weeks.
The People’s Bank of China has said that it will stabilize the local currency and doesn’t rule out depreciation of the yuan.
Liao said he expected the foreign currency to re-emerge as a hot issue when President-elect Barack Obama takes office in January.
“A weaker yuan can help Chinese exporters. However, the question is that when the external demand is shrinking, a relatively cheaper price won’t make big difference,” Liao said. “Only if the yuan depreciated by 20 percent, which is unlikely, can there be a big help for exports. If not, a mild depreciation of the yuan won’t give actual significant help to exporters.”
Lu Zhengwei, Industrial Bank chief economist, had a different view and said depreciation of 10 percent next year would help exports.
“It may be the best timing for the yuan to depreciate since 2002 against the backdrop of the current financial crisis,” said Lu. “Why should China continue to keep its currency up when currencies of other emerging markets are depreciating?”
A depreciated yuan, together with tax rebates, would help exports a lot, he said. “Depreciation is part of a more flexible foreign currency control,” Lu said.
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Latest Production News of Cement in CHINA
December 17, 2008
One of the main factors shaping the costs of Chinese factories is naturally the prices of commodity & raw materials such us oil, electricity, wages, iron & steel, plastics etc. We are closely following those trends to sharpen our market analysis and forecasts the direction of cost & price movements.
Here is one of those factors, latest cement news:
CHINA’S cement production saw a slower growth at 2.8 percent year on year to about 1.27 billion tons in the first 11 months of this year, according to figures released yesterday by the Ministry of Industry and Information Technology.
Experts attributed the slower growth pace to the adverse effects of the deepening global economic crisis and the slowdown in the Chinese economy.
Although the growth rate had been on a downward trend since September, the industrial upgrading process was moving forward, with the total industrial output of cement businesses reaching 456.8 billion yuan (US$66.7 billion) from January to last month, up 21.25 percent on year, said the ministry.
Meanwhile, the ex-factory wholesale cement price gained 12 percent from January to October year on year. The cement industry is set to post a stable growth with the implementation of China’s 4-trillion-yuan stimulus package, experts said.
China last month unveiled the package to avert an economic slump, with the funds to be spent over the next two years.
Source: China Daily
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December 14, 2008
Producer price index is properly called as “factory gate index” because it is a gauge for the prices of producers. So those who make trade with China is better to give an eye on the PPI to forecast the behavior of short-term prices of producers. PPI is also reflects the direction of production costs level because the cost is a major of input of prices.Here is the news about the recent data about PPI:
CHINA’S producer inflation will fall markedly in December, increasing the possibility of deflation.
The producer price index (PPI) fell to 2 percent in November, down from 6.6 percent in October, reaching the slowest pace since May 2006, as prices in fuel and commodities declined.
“The PPI drops more sharply than consumer inflation during an economic slowdown and this will mercilessly drag down consumer prices.
Many major world economies have entered into a recession and this had a big impact on China.
“It’s a fairytale to think China will remain immune from what’s happening in the rest of the world.”
Emerging economies face bigger challenges, including faltering external demand and outflow of capital.
Lenders should extend more loans to energy-saving and environmentally friendly sectors and help industries upgrade while improving risk control.
The CBRC targets a lower non-performing loan ratio next year, but it will “scientifically tolerate” any increases in the stockpiles of bad loans.
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