Retail Sector
Chinese Retail Prices Rise 4.6%
Retail prices rose 4.6% in November, according to the Chinese State Statistical Bureau, making the average retail price increase for the year just 6.2%, well below the government's inflation target of 10%. Retail prices are the main Chinese gauge of inflation. The People's Bank of China hopes to hold inflation to 6.4% this year. Although inflation has been a problem for the Chinese economy, peaking at 28% in October 1994, lending restrictions, price controls, and bans on property development and large capital equipment purchases have cooled the inflation rate down. However, beleaguered state-owned industries have been pressing to relax bank lending restrictions, prompting fears among foreign investors in China that inflation will return.
Asian Wall Street Journal (HK), 12/11/96
Consumer Prices Up 6.9%
Consumer prices in China rose 6.9% this November when compared to November of last year, according to the State Statistical Bureau. Consumer prices in urban areas grew 7.4% in November, compared to 6.9% in rural areas. China's main measure of inflation, the retail price index, rose 4.6% in November when compared with last year, well below the government's goal of 10% for inflation this year. The retail price index does not include changes in the price of services or utilities.
Asian Wall Street Journal (HK), 12/19/96
Restrictions on Retail Sector to Ease
China plans to relax current restrictions on foreign investment in the retail sector. Only 17 Sino-foreign retail joint-ventures have been approved by the central government since 1992, although many more have been approved at local levels. State approved ventures are limited in the operation to certain coastal cities and special economic zones, and the Chinese partner must be the majority shareholder. Huang Hai, Director-General of the Ministry of Internal Trade's policy department, said that more foreign invested stores will be allowed to operate in more areas. Priority would be given to large US and European retailers.
Asian Wall Street Journal (HK), 12/30/96
Chinese People Vie for Washington State Apples
Although China is the World's largest apple producer, the Chinese still desire the Washington State's Red Delicious variety. Many retailers in Guangzhou paste stickers that say "Made in Washington" on apples that are grown in China. Owners of fruit stands are generally not charging higher prices for them but believe that more people will by them if the come from the United States. However, sophisticated customers are beginning to be able to discern the difference between a crisp Red Delicious Apple from Washington state and a bruised apple from Shandong. Most of Washington's apples are smuggled into China through Hong Kong because of the high import tariffs of 40 percent plus a 13 percent value added tax. If the Chinese government reduced the tariffs they would at least get some of the revenue, says Brent Evans, the marketing director for the Washington Apple Commission in Hong Kong. "Right now China is getting 60 percent of nothing because most of it is going in unofficially."
China Trade Report (Hong Kong), 01/01/97
Wal-Mart Counters Fake Goods Charge
Wal-Mart may face penalties up to $260,000 if the suit against it for selling fake goods is successful. Shenzhen Londonsum Investment Development said it had paid Wal-Mart $130,000 for 100 ‘home theaters.' The sets claimed to be made in the United States, but Londonsom later said it discovered that they had been assembled in Shenzhen. Wal-Mart will let the case go to court out of a belief that it has proof of the country of origin. The China Consumer Protection Act stipulates that a retailer of fake goods can be fined up to double the cost of the item.
China Economic Review (Hong Kong), 01/01/97
Threat to Close Down Illegal Retailers
As China opens the retail sector to foreign investment in more major cities, it may begin to close down some illegal Sino-foreign retail joint ventures. A number of foreign-invested retail ventures have not received State Council approval and may be closed. "It is undeniably a mistake by local governments to approve Sino-foreign retail ventures because only the State Council has the power to assess and approve such ventures," said Huang Hai, director general of the policy system, laws and regulations department under the Ministry of Internal Trade. Huang said that law abiding operators may have to re-register with the central authorities before they continued their business. This year, the ministry will allow more foreign investment in the retail sector and open more cities, he said.
South China Morning Post (Hong Kong), 01/24/97
China's 1996 Retail Sales Increased 19.4 Percent
China's total retail sales of social consumer goods increased by 19.4 percent over 1995, reaching $296.5 billion, according to the State Statistical Bureau. The provinces which had the highest consumption rates were Guangdong, Jiangsu and Shandong. Guangdong's retail sales reached $31.26 billion, a 16.9 percent rise over 1995. Jiangsu took in $24 billion in retail sales, up 20.8 percent over the figure of the previous year. Shandong had retail sales of $20.7 billion, an increase of 21.2 percent over 1995.
CBNet (PRC), 02/03/97
Home Shopping Networks Thrive in China
Despite the blatantly Western influences of the home shopping network concept, Chinese authorities do not appear to be discouraging this retailing trend. The home shopping idea can bring big business to China and it is a good tool for smaller Western companies looking for a way into China. "We want to develop proprietary brand names, which is good for small and medium sized manufacturing companies who don't have the resources to market their own brands," says William Schereck, president of the TV Shopping Network. Starting from last July, TVSN has been broadcasting a live service via satellite and pulled down since December in China. Most of the viewers are expatriates who can own dishes under China's strict media laws. This year it hopes to distribute through some cable channels. The cable operators will get a five percent commission for the product's net value, minus shipping and tax. "We will become a contributor to China's development as so we get cooperations from the government," Schereck says. It will be difficult to establish the infrastructure that allows consumers to instantly obtain the items that flash across their TV screens as well as provide after sales service. Some have begun to build warehouses but the road and rail system remains inadequate. China has a long way to go still because although there is 250 million TV owners in China with a 97 percent penetration in Beijing, according to Survey Research Group, there is still a low ownership rate of telephones. Asia Market Intelligence estimates there are only 2.6 million telephones in Beijing; 3 million in Shanghai and 5.5 million in Guangzhou, which is the highest penetration of any region of China. Mobile phones bring the number a little higher but not much. Home shopping services are hurt by these statistics. Switchboards also don't have the capacity for so many calls at once. Asian switchboards fall way short of those in developed markets. Even Hong Kong doesn't have the infrastructure for this. Payment is also a difficult issue in China where credit card usage is minimal. However, in spite of these problems. The attraction of millions of households will have appeal to many shopping networks. "Sheer demand may help to develop the infrastructure significantly," says Wick Smith, managing director of advertising agency BBDO in Hong Kong.
China Trade Report (Hong Kong), 02/01/97
Chinese Economists Forecast a 10 Percent Growth in Consumer Spending
An unnamed government official predicted rapid growth in China's consumer market. According to the forecast, retail sales are expected to reach $346 billion, a ten percent increase over last year. Development in the rural market and opening the housing sector to the free market will make the sectors two new powerhouses for China's economy, the official said.
VOA (U.S.), 02/11/97
Amway Sales Grow by 300 Percent
Since production at Amway Corp's $100 million Guangzhou plant is being outstripped by demand, the company is considering investing more in building a plant in Shanghai. The company has seen amazing growth with sales increasing 310 percent in the last quarter to November. President Dick Devos said that Amway's business has not been touched by the slowdown in China's retail sales. He also said that China had the potential to become as big as its top markets - the U.S. and Japan.
South China Morning Post (Hong Kong), 02/20/97
Huge Growth of Chain Stores in Shanghai
Chain stores are rapidly expanding in Shanghai, where currently there are 2000 in operation and plans for over 1000 chain supermarkets by 2000. Being the focal point of Shanghai's retail sales development plan, sales are expected to reach $1.93 billion by that time, accounting for 10 percent of all sales. Of all sectors in retail, supermarket growth is the most notable, said Hong Guankang, vice director and general secretary of the Shanghai Chain-Business Association. In 1996, sales from supermarkets were more than $481 million, making up three percent of the cities total retail sales. This compares with $277 million in 1995, said Hong.
Cbnet (PRC), 02/24/97
Changes in the Retail Sector
The Chinese government intends to restrain the fast spread of large department stores in China, according to Premier Li Peng's report Saturday to the National People's Congress. He urged that government controls be placed on establishing large shopping centers. The profitable growth of retail sales has given rise to the rapid spread of large department stores. More than 300 such stores have sprung up across the country, including 17 superstores. "Managers of large stores should feel a sense of crisis despite their good performance at present," said Geng Shuhai, a marketing department division chief with the State Planning Commission. He further noted that chain stores will be competing with the superstores of the future. "Large department stores are unreasonably located. Most of them are crowded into downtown business centers, resulting in fierce competition," Geng said. People prefer retail outlets located near their homes, he said. "The number of large department stores hinges on a city's own specifics, but chain stores and discount shops are the coming trend. However, regional protectionism has severely hindered the spread of chain stores." The Beijing city government has decided that it will not approve the construction of any new department stores with more than 10,00 meters of floor space. "The expansion of chain stores is crucial to commercial reform," said Zang Hongge, director of the Beijing Commerce Commission.
China Daily (PRC), 03/07/97
Retail Sales Increase 19.8 Percent in January
China's retail sales of consumer goods reached $27.5 billion in January, an increase of 19.8 percent over January of 1996, according to the State Statistical Bureau. In terms of sales volume, Guangdong, Zhejiang and Jiangsu had the highest sales. Retail sales in Guangdong rose 19.1 percent to $3 billion; Jaingsu's retail sales rose 14.9 percent to $2.2 billion; Zhejiang had retail sales of $1.8 billion, representing a 19.9 percent increase over the same period in 1996.
Xinhua News Agency (PRC), 03/11/97
U.S.- China Agreement Help Country Solve it's Distribution Troubles
Exporters and Retailers have long been plagued by weak transportation and distribution links in China. The United States, however, will soon bring relief to the situation as it has opened another service sector with the recent renewal of the Sino-U.S. maritime agreement. The new accord have brought opportunity to two ocean carriers, American Consolidated Services and an affiliated company of American President Lines and Sea-Land Service Ltd. They will now be able to expand their logistical services and operate directly in China with their wholly owned entities and will not have to go through a middle man. They may now increasingly handle inward bound services which will mean a better service and greater convenience for multinational companies who want to export to China. APL was licensed to provide a full range of logistical services in China like distribution and warehousing. These companies will be directly involved in supporting the movement of their customers' goods through every link in the supply chain. This not only includes goods brought to China from the outside but also the movement of merchandise between two points within China (point-of-manufacturer to point of sale). Specifically, the Chinese will now allow American transport companies to book space, load and unload containers, sign and issue cargo receipts, warehouse and store, collect freight, prepare and maintain containers and arrange trucking services. Customs clearance is really the only activity they cannot do.
EIU Business China (U.K.), 03/17/97
No Policy Changes for Foreign Investment in Retail Sector
According to an official with the Department of Policies and Regulation under the Chinese Ministry of Domestic Trade, China's policies toward foreign investment in the wholesale and retail market will remain basically unchanged in 1997. There will neither be a relaxation or a loosening of current restrictions to foreign-funded enterprises in the area approved by local governments. Although there was an earlier statement by another Chinese official that China will open the wholesale market to foreigners, the official said that there is no proposal for a further opening of wholesale business to foreigners on the agenda and progress in this area appears impractical this year. He said that although China has discussed further opening these fields during negotiations to enter the WTO, China will act with caution because of the importance of the matter. The greatest concern of the Ministry of Domestic Trade now is to help domestic wholesale enterprises out of the mire. However, as to retail sales he said that China plans to add to the existing 11 cities that can set up trial Sino-foreign joint ventures as well as increase the JVs in existing cities. He added that this would probably not take place this year and would not name which cities would be opened.
China Economic News (PRC), 02/24/97
The U.S. and China's Bilateral Textile Agreement
The new bilateral textile agreement negotiated with China in February has novel market access provisions. China has agreed to lower and bind tariffs on a number of foreign textile products. The agreement also specified that U.S. quotas were reduced on 17 categories of Chinese textile exports to the United States. This will result in a decline in total quota for Chinese textiles in 1997. What is particularly significant to American importers and retailers, however, is the agreement's long term preservations of U.S. quotas on Chinese-made textile products. China has not only lowered the barriers to its textile market and let the U.S. restrict access to its own market, but it also gives the U.S. the right to impose new restrictions on textile and apparel imports from China, even if China should accede to the WTO. The U.S. objective in the negotiations was to gain market access pledges from China, as well as halt non-tariff barriers. The first tranche of PRC duty reductions is scheduled for 1998, with more in 1999 and 2000. Among the 100 or so items are industrial and printed fabrics and home furnishings, which may be areas where U.S. products can compete in China. No precise classifications or rates have been published yet however. In addition the United States obtained cutbacks in many quotas on Chinese textile imports as well as the right to limit textile imports for eight years beyond the expiration of the bilateral agreement. These rights assume China will join the WTO before the agreement expires. That the new agreement is satisfactory to Beijing is probably a reflection of its desire to smoothly enter the WTO rather than its real liking for its provisions.
The China Business Review (U.S.), 03/01/97