Market Information

The Chinese will be drinking New Zealand-roasted coffee following a deal done by the Kiwi owners of the Esquires coffee house franchise.

Brothers Stuart and Lewis Deeks own the Canadian-developed coffee house franchise for everywhere outside of Europe and North America, and have expanded from New Zealand to the Middle East, Fiji and India.

Now they have sold the master franchise for China to a large investment company in Yunnan province in the country’s south.

Yunnan Metropolitan Construction Investment (YMCI) - part-owned by the Yunnan government and listed on the Shanghai stock exchange - will open 250 Esquires outlets over the next 10 years. The first store opened in the central business district of Beijing a month ago.

Source: NZ Herald

Because of its rapid economic growth over the last 30 years, it’s easy to forget that China is a communist country. The Chinese, like everybody else, love money. But the Communist party is clearly in control.
One of the areas controlled with an iron communist fist is China’s media. The main TV station, China Central Television or CCTV, is owned, operated, and controlled by the government. Unlike the U.S., Chinese government officials can’t spout off their own opinion. Instead, they must speak the ‘company line’ of the ruling Communist Party and carefully choose their words.Frankly, I don’t pay too much attention to any government official, Asian or not, when they boast about how wonderful everything is. I do, however, pay very careful attention when they start talking about trouble. You see, glowing words be can true or a complete lie. But whenever the talk turns negative, you can take those warnings to the bank. And the ‘talk’ coming out of China has turned very, very negative. Just last week, five very knowledgeable insiders had some not-so-pretty things to say about the Chinese economy.

Negative Talk #1: Li Yizhong, head of the Ministry of Information and Technology, said this:

“The international financial crisis is having a severe domestic impact.
“We don’t think we’ve bottomed yet.
“Just about every industry has overcapacity.”

Negative Talk #2: China’s economic and social goals are based upon a series of Five Year Plans. The head of that planning body, Zhang Ping, described the economic outlook from his office’s perspective:
“The global crisis has not bottomed out yet. The impact is spreading globally and deepening in China.
“Some domestic economic indicators point to an accelerated slowdown this month.
“Excessive bankruptcies and production cuts will bring massive unemployment, stirring social unrest. Owing to dramatic changes in the international economic and financial environment, the Chinese economy faces growing downside pressure.”

Negative Talk #3: The Minister of Human Resources and Social Security, Yin Weimin, echoed the same warning:

“The current situation is grim, and the impact is still unfolding.”

Negative Talk #4: The biggest cheese of all, Chinese Premier Wen Jiabao, said a mouthful last week, too:

“We must be crystal clear that without a certain pace of economic growth, there will be difficulties with employment, fiscal revenues and social development.
“In this coming period, we will starkly confront the effects of the sustained deepening of the international financial crisis and pressure as global economic growth clearly slows.”

Negative Talk #5: This last comment wasn’t from a Chinese official. It was, however, from someone who should be on top of things since his country is one of the key suppliers of natural resources to China. I’m talking about Glenn Stevens, head of the Australian central bank, who said:
“The most striking real economic fact of the past several months is not continued U.S. economic weakness, but that China’s economy has slowed much more quickly than anyone had forecast.
“There is every chance that the rate of growth of China’s (gross domestic product) is currently noticeably below the 8 per cent pace that is embodied in various forecasts for 2009.”

Those five insiders have good reason to talk cautiously because the Chinese economy, while still growing at a healthy pace, is getting pulled down.

Consider these three pieces of economic news from last week …

Chinese exports fell by 2.2% in November, the first time in seven years …

Imports fell by eight times as much, dropping 17.9% in November, and …

Manufacturing output shrunk by a record amount

Information taken from: Tony Sagami, Money Markets

Picture of Beijing’s urban development: Photo by Joe

China has rewritten both the theory and history of economic development. In just 30 years, it has gone from the brink of economic collapse to the cusp of a newfound prosperity.

The current economic crises is only part of the economic cycle and is sceen as a new phase in China’s economic growth.

“The world is hardly coming to an end. At work are the time-honored forces of the business cycle - driven in this case by the US recession that should inevitably be followed by recovery.”

However painful, cyclical adjustments are also an opportunity. For China, it underscores the imperative of shifting its growth impetus to private consumption.” Stephen Roach, Chairman of Morgan Stanley Asia.

taken from: China to Deal With Global Slowdown

Unicon’s first wine shipment arrived in Beijing last week and the sales team are busy presenting the wines to our retail and Hotel network.

Wineries currently represented by Unicon in Beijing are:

Morton Estate
Astrolabe
Wine Growers of Ara
Paddy Borthwick
Distant Land
Coopers Creek

 www.unicon.co.nz

Here’s a good link for businesses thinking of exporting to China. It includes simple steps to assess if you’re ready for the challenges of China as well as information, case studies and support for those wanting to look at the opportunities China offers. Link

Fonterra has already benefited from the newly inked free-trade pact with China.

It has signed a deal worth more than $300 million, The Press newspaper reported this morning.

Fonterra’s Japan-based general manager of trade for Asia, Philip Turner told a Parliamentary select committee - hearing submissions on legislation to give effect to the trade deal - that the contract was to supply “a major multinational customer” with nutritional milk powders.

Mr Turner said the “commercially very valuable” deal came within weeks of the signing of the agreement in early April.

“We’ve been able to conclude a deal recently on the basis of the FTA being signed, which results in a considerable volume of business and processing being done in New Zealand that would otherwise have gone offshore, in this case to Singapore,” Mr Turner said.

Fonterra’s written submission said the deal would generate more than $300m in revenue over four years.

“These value-added dairy products will be manufactured in New Zealand factories, using New Zealand milk, capital, labour and technology,” it said.

“Without the FTA with China, lower-priced product from New Zealand would almost certainly have been processed offshore in Asia.”

Trade Minister Phil Goff welcomed the news.

“Fonterra’s submission to Parliament, and its announcement of this deal only weeks after signature of the FTA, is further evidence of the value of that outcome to New Zealand,” he told The Press.

China is New Zealand’s fourth-largest export market for dairy products, earning $523m last year, up from $144m in 2001.

The phase-out of tariffs on all dairy products under the deal over the next five to 12 years will save Fonterra $56m on current export values.Fonterra inks $300m China deal after FTA

Via: Fonterra inks $300m China deal after FTA

Over the past few months the Unicon team have been working hard fitting out our first concept store in the new “Fangheng Mall” in Chaoyang District, Beijing. The store opens today so please feel free to come along to celebrate with us! The image below is of the shop’s last stage of the fit-out.

The concept of TOP BRAND is to allow apparel designers to showcase their products to the sophisticating Chinese middle class market. We see huge demand for genuine imported designer apparel in Beijing but most brands sit in a price bracket outside what the average Chinese consumer can afford.

To overcome these pricing issues we import end of season stock from designers and brands from around the world. In essence TOP BRAND will be a middle to high end outlet store.

The store will open with past season ranges from Calvin Klein, Z Zegna and Lacoste and there will be a fast turn over of labels to keep the store fresh and interesting for our customers.

Latest images of the store below.

Joe

Details on tariff cut programme in trade deal with China.

The deal eliminates tariffs on 96 percent of New Zealand’s current exports to China by 2019.

For other than specified “sensitive” goods - kiwifruit, some meat, sheepskins and dairy products - the following programme will apply:

* When the deal comes into force - probably October 1 - 35 percent of imports from New Zealand which currently face tariffs of up to 5 percent will be duty free;

* Duties in the 6 to 20 percent range will be phased out over five years until 2012; and

* Tariffs greater than 20 percent will be reduced to 20 percent on day one and then phased out by 2013.

Dairy

* Some dairy products - infant milk formula, casein, yoghurt and whey - will be phased out over 5 years;

* China’s tariffs on butter, liquid milk and cheese will be phased out over the 10 years to 2017;

* Skim and whole milk powder will be removed over 12 years; and

* There are mechanisms to delay the tariff reductions if exports exceed certain quantities.

Meat

* Tariffs on beef and sheep meat, and edible offal will be removed over 9 years.

Fruit

* Apple tariffs will be removed by 2012 and kiwifruit over 9 years.

Wool

* A duty free quota of 25,000 tonnes of wool and 450 tonnes of wool tops will be set increasing by 5 percent a year for 8 years. The initial quota is 75 percent of current exports or $122 million a year in tariffs.

Wood and paper products

* China will be bound on the zero tariff on logs and sawn timber and a limited number of pine products will also be given preferential status.

* Some processed wood and paper products accounting for 4 percent of New Zealand’s exports to China will not be covered by the trade deal. This is because under WTO rules is China gives preferential status on the products, they must be applied to all WTO members.

What China Gets from New Zealand.

* All tariffs will be removed by 2016;

* Currently 37 percent of China’s exports to New Zealand are tariff free;

* An additional 2 percent of exports with a tariff of five percent or less will be duty free from October 1;

* Tariffs on most textile, apparel, footwear and carpet products will be phased to zero over seven years or nine years. Tariffs on heavily exported goods in clothing and footwear will be phased out by 2016, lesser traded goods by 2014; and

* Tariffs on all other goods (including steel, whiteware, plastics and furniture) will be mostly phased out by 2012 with the remainder by 2013.

* Ian Llewellyn is in Beijing with the assistance of the Asia New Zealand Foundation.

via:  Details on tariff cuts in China trade deal

3:30PM Monday April 07, 2008

Winners China will lower tariffs on most imported NZ agriculture and manufactured products to zero (over time), saving our exporters a total of at least $100 million annually.

With Chinese tariffs running at about 10 per cent for milk powder (yoghurts and cheese top 15 per cent); 12-20 per cent on sheep meat and 15-20 per cent for kiwifruit, the upside is considerable. But there will a lengthy phase-in period for dairy as China fears its own fledgling dairy farming industry would be squashed.

Manufacturing exports ranging from machinery through to light industry, whiteware, automotive parts, steel and aluminium products will benefit to varying degrees. But reciprocal liberalisation will ultimately make the local scene more competitive.

Losers Wool: China is NZ’s biggest market for wool products which enter at very low-duty rates (1 per cent under a tariff rate quota system).

But out-of-quota exports face a 38 per cent duty. China strenuously argued going to zero would wipe out the livelihoods of its sheep farmers in frontier regions. A special quota arrangement is expected.

Forestry: China is one of the world’s largest forest product importers. But complications under a provision in China’s WTO accession deal with the US proved a sticking point. Some co-operative element may emerge.

Textiles and apparel manufacturers: Will have to up their game when NZ speeds up remaining tariff reduction in these areas, opening the way to stiffer competition from Chinese imports.

Electronics: A separate agreement will be signed to ensure co-operation on conformance assessment for electrical and electronic equipment. Some retailers are nervous NZ’s safety standards may become compromised.

Movement of people
Working-holiday programme for young professional Kiwis to go to China.

NZ business people will find it easier to get short-term visas; an advance record system will ultimately be promoted to ensure important enterprises and organisations on both sides get timely entry visas.

More exchanges of experts, scholars, students and technicians and intra-corporate transferees.

Chinese traditional medicine experts, acupuncturists, Mandarin teachers and chefs will be allowed into NZ under a constrained quota.

No invasion of unskilled Chinese workers into NZ. Trade Minister Phil Goff strenuously opposed a push for Chinese labourers to work on NZ construction sites; Chinese workers must be paid NZ rates while here.

Trade liberalisation services

Winners
Tourism and education ex-China are major money-spinners for NZ. An agreement to facilitate two-way tourism traffic is expected. Education earnings fell away after the collapse of English language schools and the appreciation of the NZ dollar. Look for more NZ educational institutions running schools in China in co-operation with Chinese authorities in areas like biotech, management and telecommunications. NZ students may also be encouraged to study in China.

Forestry: China is one of the world’s largest forest product importers. But complications under a provision in China’s WTO accession deal with the US proved a sticking point. Some co-operative element may emerge.

Textiles and apparel manufacturers: Will have to up their game when NZ speeds up remaining tariff reduction in these areas, opening the way to stiffer competition from Chinese imports.

Electronics: A separate agreement will be signed to ensure co-operation on conformance assessment for electrical and electronic equipment. Some retailers are nervous NZ’s safety standards may become compromised.

via: So what’s in it for us   

NZ Herald

A COURT in the southern Guangdong Province has fined a five-star hotel after holding it responsible for leasing space to a seller of knockoff Louis Vuitton products. The Intermediate People’s Court in Dongguan City ordered the hotel to pay 100,000 yuan (US$14,124), in combined compensation with the shop manager, to the French luxury goods producer. The court also ordered the shop and the hotel to stop selling the products and destroy any remaining counterfeit items. The court documents didn’t name the hotel but said it collected a monthly rental of 20,000 yuan from the shop. The documents said the salespeople in the shop wore hotel uniforms. “There were no signboards or any notices in the shop for customers to be able to identify that its management was independent from the hotel,” the court ruled. Louis Vuitton demanded compensation of 500,000 yuan from the hotel and a public apology. But the court said the hotel hadn’t caused widespread market harm to the brand. The French firm has also won a suit against a Chinese handbag producer for copying its trademark design, sources within the No. 1 Intermediate People’s Court in Beijing said. The court heard the handbag company obtained a Chinese patent in October 2003 for a bag design, but Louis Vuitton said it was too similar to its trademark design. It took the Chinese company to court in April The court said it had no jurisdiction over the validity of the patent, but could order the firm to stop using the design because it was being disputed.

Source: Bag maker sues fakers

via Shanghai Daily: National by on 3/19/08