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More US big corporations going bankrupt

Yvonne Dong — Fri, 10 Jul 2009 10:13:03 +0000

As the US economic slowdown claims more victims, industry data shows that large US cooperate bankruptcies have been accelerated in recent weeks.

The data compiled by Bankruptcy Data.com and reviewed by Reuters indicates that eight public companies with assets of over $1 billion have filed for bankruptcy protection in the last four-week period. It also suggests that it is the largest number of multibillion-dollar public company bankruptcies in a four-week period since the year began.

The BankruptcyData.com website tracks companies that have some form of publicly traded security including stocks or bonds. Brain Hamilton, co-founder and CEO of financial information company Sageworks Inc., said corporate revenue is down in the United States and when topline revenue is down, there’s less money to spread through expenses.

During the past few weeks, long-term lodging facility operator Extended Stay Inc, which had assets of $7.13 billion before its bankruptcy, and theme park operator Six Flags Inc, which had assets of about $3.03 billion both filed for bankruptcy. With assets of more than $91 billion, General Motors Corp filed for creditor protection on June 1, becoming the largest Chapter 11 bankruptcy case so far this year.

The widespread credit crunch and economic slowdown have taken such a toll on corporations and individuals that bankruptcy courts are struggling to manage the load.

Barbara Lynn, chair of the bankruptcy committee if the Judicial Conference of the United States, suggested at a congressional hearing that Congress authorize 13 new permanent bankruptcy judgeships and make 22 temporary bankruptcy judgeships permanent. She said there were almost 1.2 million bankruptcy petitions filed in the one-year period by March 31, 2009, nearly doubled the number of 2006.

Hamilton from Sageworks expects to see more bankruptcies for companies in the auto or real estate industries. He said it is widely known that the automakers are having great difficulty, if anyone is producing parts for them, then he is also having difficulties. According to Hamilton, anything around real estate is probably going to have difficulty for the latter part of 2009.

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China needn’t to be responsible for US crisis

Yvonne Dong — Fri, 20 Feb 2009 10:01:05 +0000

Sino-Us relations is now facing new challenges due to the global economic crisis, said Morgan Stanley Asia Chairman Stephen Roach on Tuesday at the US Congress’s US-China Economic and Security Review Commission.

Roach said that during the recession while the America’s unemployment gets high, it is inevitable for people to believe what Geithner has commented—China is playing a more influential role in this crisis. His words were rooted from what Treasury Secretary Timothy Geithner had said at a Senate confirmation. The latter blamed China for controlling the Renmibi exchange rate.

There are three factors for US to think China should be responsible for the crises—an expansion of bilateral trade deficit, manipulation of the currency exchange rate and the low disposable income for US domestic employees.

In Roach’s point of view, US administrators and leaders have to shift attention from the serious crisis to other aspects. Therefore, China becomes a scapegoat by being accused of responsible for this recession.

He said that the bilateral deficit was grounded on some factors. A bubble-prone, savings-short US economy needs a foreign saving surplus to balance its inflation. In this sense, the economy tries to attract capital inflow by massive current account and deficits.

In fact, besides China, the US runs a multilateral trade deficit with 100 other trading partners, which of course is not resulted from Sino-US trading imbalance. So, Roach thinks it is incorrect to blame China for US domestic problems.

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Trade barriers to be caused by American stimulus plan

Yvonne Dong — Wed, 18 Feb 2009 09:12:21 +0000

A series of trade barriers will be caused by the “buy American” products only clause in the $787-billion US economic stimulus package while large exporters, such as China will be hurt by this move, economists said last Sunday.

It is obvious that trade protection is certain to rise, said Mei Xinyu, a trade expert form the Ministry of Commerce. The current situation will stay for some time, he said, referring to the lasting effects caused by the US stimulus package.

The package was passed late on Friday with the proposal of distributing tens of billion of dollars into public building projects, and tends to impose conditions, for instance, only US-made steel and products can be used.

Mei also said that China could be greatly suffered from the action since it is a major manufacturing exporter that supplied enormous goods to all the other countries.

The trade barrier comes when efforts are needed to fight the devastated economic crisis in more than fifty years.

It is impossible that protectionism will do any good to anyone, said Feng Jun, a Shanghai-based WTO expert, the package is not feasible in the age of globalization since the world today is not the same as that of the 1930.

He added that the “buy American” plan “is impossible to work”. On the contrary, it would cause trade barriers. At the same time, “short-sighted” governments will constrains foreign products and overseas investments to protect jobs and industries within the country.

Mei doesn’t agree with the move that China will not use protectionism when implementing its $586-billion stimulus package. He urged Chinese government to create an even favorable field for domestic business under the WTO framework. “We should not wait to be a victim,” he said.

It is found that the number of anti-dumping and anti-subsidy investigations into Chinese products has increased. For example, India has made an announcement that it’s 17 “trade remedy” will be made to restrict Chinese products since October 2008.

Over the weekend, Group of Seven (G7) finance ministers promised that they will not use protectionism in the process of making efforts to stimulate their domestic economies to fight the world’s most awful economic crisis.

Italian Finance Minister Giulio Tremonti, the meeting’s host, said the other ministers insisted on offending protectionism. It is a specific dangerous thing not only for economies which is heavily based on exports, he said in Rome.

US Treasury Secretary Timothy Geithner made an assurance to his competitors that the $787-billion package would not break the US’s promise of free trade.

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Economy in Jiangsu Sees the Light of Spring

Yvonne Dong — Wed, 18 Feb 2009 04:00:45 +0000

The latest figures from the provincial statistics have shown that Jiangsu province is rejuvenating after the blow of the global financial recession and radiating potential of steady growth this year.

Jiangsu, obviously shown from the statistics, regained investment growth in the last two months of 2008. Also, the vitality was resumed to the sales of commercial residential properties with the 233 percent monthly growth in residential space last December. Even the companies, mainly dealing with export business and being one of the targets that the global financial crisis attacked most severely, have found its turning point. There is a total value of $234 billion in this respect, with an increase of 16.9 percent.

The provincial governor Luo Zhijun made the comment in his government report at the second session of the 11th provincial people’s congress that opened on February 5. He said, “Jiangsu will make greater effort to accelerate the nation’s economic recovery in the way of maintaining steady economic growth, in spite of the ongoing impact of the economic crisis.”

Jiangsu, known as the root of economy of the country apart from Zhejiang province and Shanghai municipality, was described by Guo as “risk-resistant” and “innovative” when confronting the economic recession.

He also said that with the primary task of speeding up the economic development, Jiangsu would never stop stimulating domestic demand and developing an open economy this year. For the latter part, rural reform and development and infrastructure spending would come as the decisive fields.

As a place gathering a large number of private firms, the province would enhance the support for the development of small and medium-sized corporates and hi-tech companies by granting them rights to get loans. At the same time, he added, the province would bring in investments to such important factors as R&D, logistics, environmental protection and services.

“As a matter of fact, the financial crisis has brought us a chance to optimize industrial structures and encourage technological innovations,” the governor said.

“My company was carried out of a tough period by the generally confidence and optimism delivered by the governor,” said Sha Weiping, chairman of Jiangsu Silk Group which achieved double-digit growth in profit last year through persistent investment in R&D and production.

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Job Fairs Came as Hope for Jobs

Yvonne Dong — Wed, 18 Feb 2009 02:52:02 +0000

Due to the global economic recession, job seeker started hunting even before the Spring Festival ends. Around 30,000 people poured into the first job fair in the capital on February 6. They were anxious to wait in the long line for about half an hour in order to gain access to the new hall of the Agriculture Exhibition Center. Unfortunately, many of them were kept outside, even having a ticket in hand, because of the overcrowded hall.

At the same time, the job market will be patronized by more that 7 million college graduates. And about 9 million urban unemployed would be hit by the slim possibility of getting a job.

The job fair lasted for two days. And the candidates were scrambling for the 3,000 to 4,000 posts offered by about 300 employers.

“We can get from the look of the fair that the job market is doom now,” Li Shuyu, a fair organizer, said, “We have strengthened the security for the fair. Many job hunters were unwilling to leave the hall even after the fair closed at 4 pm because they wanted to have a few more words with their prospective employers.”

Since the global economic recession attacked the job hunters in its strength this year, the government would meet the toughest period in the first half of this year. For this, it has to prepare for almost 8 percent GDP growth against the double-digit increase in the years before. And the registered urban unemployment rate is expected to be kept at 4.6 percent this year, reaching the lowest point since 1980.

A large number of people outside Beijing could not resist the temptation of finding a job and were attracted to the two-day fair. “We came here in the belief that Beijing would offer more opportunities,” said a woman from Shandong province who was accompanying her daughter. “But we’ve found there are more job seekers here.”

The lady, with her daughter, is still staying in the hotel with the intention to attend more job fairs to be held in the weeks to come. She said that her daughter was under great burden, so she could not just let her hunt a job alone.

Job markets are not only the straw for people who are young, weak and fresh, but those with perfect capability. Chen Liuyu, the former vice-president of a container company, is the one in case. He quit shortly after the company launched a restructure plan as the result of the global financial crisis. He said in the first time he attended a job fair that he had always kept an open mind and he just wanted to figure out the fair that day. He was in full confidence that he would get an ideal job in no time with his 30 year experience.

As it was reported officially that about 20 million migrant workers had been driven out of career since many labor-intensive factories handling export business had slowed down resulting from the crisis.

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New tax policy for lead-acid battery exporters

Yvonne Dong — Tue, 17 Feb 2009 09:36:14 +0000

According to China’s Ministry of Industry and Information Technology (MIIT) last week, it is considering cutting tax for lead-acid battery exporters in order to stop them from laying off workers.

An MIIT official said they are discussing the report but no conclusion has appeared. His team is waiting for industry figures from last year and will decide whether to propose the stimulus plan a few weeks after that.

It was reported by the Shanghai Securities News, the China Electrical Equipment Industrial Association is trying to persuade the government to cut taxes on lead-acid battery exports.

It is said that global economic recession has forced one third of Chinese battery exporters in Guangdong, Fujian and Zhejiang provinces to stop production. About half of Chinese battery exporters are said to be considering a move to foreign markets such as India and Vietnam where will cost less. The imminent move will probably lead to 200,000 layoffs.

However, the MIIT official said China’s battery industry is better than the reports. The export figures show that from September to November last year, China’s battery industry did not drop so much as the estimation.

Lead-acid batteries are mainly used in autos and motorcycles, the products of which have been cut down significantly by the global financial crisis.

MIIT figures show China’s battery exports increased 17.6 percent in the first 11 months of 2008. But the growth was 4 percentage points lower than that of the first 10 months.

Wang Zhengjie, general manager of Neata Battery Manufacture, a lead-acid battery company in Zhongshan, Guangdong province, said he has cut about 120 of his 350 employees this year to tackle with the shrinking demand. He expects the unfavorable market situation could help him surmount smaller competitors rather than the government providing any help.

China, the world’s largest battery producer, cancelled 15% export refund on tax in 2006 to damp down the country’s overheating passion on high energy-consuming enterprises investment. But experts forecast that the move, as well as RMB appreciation and increasing raw material prices, has forced Chinese battery manufacturers to suffer half more costs than their foreign competitors.

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Bayer to set up new centre in China

Yvonne Dong — Mon, 16 Feb 2009 09:17:27 +0000

A research and development (R&D) centre will be set up by Bayer Schering Pharma in Beijing to benefit from the country’s health reform plan which will cost the Chinese government 850 billion yuan. The centre will cost Bayer 100 million euros over the next five years.

Besides the other three centres in Germany and the US, the centre in Beijing will be the fourth in the world for the pharmaceutical division of the German drug and chemical group Bayer.

According to the company, the new centre aims to develop new drugs tailored to Asian patients and plans to lead conduct research in partnership with Tsinghua University.

Industrial experts forecast that the investment of 850 billion yuan in the nation’s healthcare industry over the next two years will help keep the sector’s 20 to 30 percent annual growth.

The reason that Bayer decided to invest in China in such a global recession is that the healthcare plan can be beneficial to expand business in China, said Andreas Fibig, chairman of the board of management of Bayer HealthCare.

As Bayer’s third largest and the fastest growing market, China now has its three manufacturing units which are located in Beijing, Guangdong and Jiangsu. Most of the products are sold in China.

Fibig said in spite of the financial crisis, the healthcare business did not get any negative impact. He is confident with the market in 2009. Bayer will outperform the local market, which is expected to grow over 20 percent year-on-year in the next two to three years, Fibig said.

Results from IMS Health, the world’s largest medical researcher have showed that based on sales revenue, Bayer is the NO.1 among international healthcare companies in China. Its local sales in 2008 increased over 50 percent compared with the same period in 2007.

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Unemployment Rages around the Country

Yvonne Dong — Fri, 13 Feb 2009 10:33:41 +0000

Judging from an investigation conducted in December and involving 100 economists, we can see that unemployment has become the toughest and most urgent problem that Chinese economy encountered last year. Ninety percent of the economists surveyed gave their opinion that the enlarging group of the unemployed is the top challenge for the Chinese economy, outweighing the economic slowdown and social instability. More seriously, the survey showed the unprecedented decline of economists’ confidence since 2004.

“The survey results show that government policies should be directed at addressing unemployment,” said Lin Yixiang, chairman and CEO of TX Investment Consulting Co, one of the conductors of the survey.

The deteriorating situation of unemployment which arouse anxiety is also an indication of the blue prosperity of the nation’s job market since over 20 million migrant workers covering sixty percent of all, have been driven out of the market over the past few months. Apart from the migrant workers, the registered urban unemployment rate is predicted by policymakers to jump from 4.2 percent at the end of 2008 to 4.6 in 2009. As for the economic growth in the country it has dropped from 13 percent in 2007 to 9 percent in 2008 and it will, as foretold by the International Monetary Fund, drop to as low as 6.7 percent, far below 8 percent that is the perennial goal set by the government.

Effective steps have been taken in reaction of the economic recession. In the last November the government has made decision to stimulate the weakening economy with a 4 trillion stimulus package. Just at about the same time, a schedule was mapped out to promote the ten chief industries in the country. Policymakers said in January that 850 billion yuan will be spent to ensure that the country’s 1.3 billion people can afford to gain access to the healthcare by 2010.

But, decision is proven to be not well received. Eighty-six percent of the economist posed their opposition that the government should concern more on such social spending as education, medical care and the social security system. They also called for a reduction on direct investment in infrastructure projects, with the consideration on the misallocation of resources and corruption.

More than 70 percent the economists showed their worry that the Chinese economic slump will go on this year, reaching the worst in summer, while three-fifths of the economists predicted that the global situation won’t rebound until 2010.

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Investors suffer great losses in stock market

Yvonne Dong — Wed, 14 Jan 2009 03:59:20 +0000

The stock market in economic slowdown could turn the hard-earned savings to ashes instantly which was exactly the experience of Wen Wu, a government employee of Loudi in Central China Hunan province.

Wen Hu now has lost nearly all of his 240,000 yuan savings in the stock market with only 7,000 yuan left in his account.

According to a recent survey from the official Shanghai Securities News and Stock Star, only 6% of the respondents had made money in the past year and while over 60% of the 25,110 respondents has lost nearly 70% of the money they invested in the Chinese stock market.

The survey also showed that more than half the respondents said they were “fully” invested in equities while 30 percent said they had kept on buying in the past several months in the false belief that the market had bottomed out.

Fang Yu, a retiree in her mid-50s, decided to top up when the leading indicator sank to 3,000 points with keeping hearing from analysts and economists about an impending market rebound. She found she was to naïve after the indicator dropped to below 2,000.

Wu Feng, an analyst at TX Investment Consultant said that unlike professional institutional investors, individual investors prefer concept sectors and high-risky cyclical sectors, such as energy and metals which coincidently have the largest drops this year.

Stocks of nonferrous metal, civil aviation, and insurance companies led the hefty fall this year, with nonferrous metal declining nearly 80 percent.

That’s the reason individual investors got such great losses, said Wu.

Based on the latest figures from the China Securities Depository and Clearing Co, nearly 120 million A-share accounts were opened with various stock brokerages as of Dec 19. Of these, 199,700 accounts were opened in the week from Dec 15.

Shares held by these accounts amounted to 4.5 trillion yuan, or nearly 50 percent of the total capitalization of all tradable shares, according to Wu.

The massive losses of has forced investors to focus on the shift from stock market to other sectors. About 20% of the respondents have shelved their plans of buying new apartments, cars or refurbishing their homes.

70% respondents of the survey from the Shanghai Securities said they would exit the stock market this year while 58% said they would retreat from the market.

There were 27% respondents expecting the stock would drop further in the beginning of 2009 before recovering later. Others forecasted that the stock market will rise significantly early this year.

Due to the recession of the stock market, people’s enthusiasm of investing in the stock market will be shattered in 2009, given a series of panic selling in 2008, said Wu.

Are you interested in the business opportunities in China?

China is one of the world’s great growth markets and is likely to be for many years to come. Foreign companies often face difficulties in assessing Chinese market demand and enacting effective strategies because of the language barriers, culture differences, and high expense.

BPOVIA is the leading virtual assistant and Knowledge process outsourcing (KPO ) service provider in China. BPOVIA is the only virtual assistant company ever been nominated for the prestigious “Red Herring 100 Asia” Awards 2008. Combines international perspective with local know-how, BPOVIA can provide our clients China business development service and help our clients doing successful business in China.

Please visit http://www.BPOVIA.com/ for details about our service.

Fast food chains accelerate their paces of expansion

Yvonne Dong — Tue, 13 Jan 2009 09:33:45 +0000

The battle about market share between US fast food chains Kentucky Fried Chicken and McDonald’s has been lasting for a very long time since they appeared in China.

Recently, both the companies announced the plans of expansion and cutting price to attract more customers.

Zhao Li, the company’s general manager, said at the ceremony marking the opening of the 200th KFC restaurant in Beijing that in spite of the economic recession, they will open another 400 new restaurants in 2009 in China.

There have already been 2,300 KFC stores in 450 Chinese cities. This year, they plan to open more new stores than the previous year’s average.

According to McDonald’s China Chief Executive Officer Jaffrey Schwartz several weeks ago in Dongguan, they will add another 175 restaurants this year besides the 1,000 stores in the country.

Due to the economic recession, fast food chains have been more welcomed in the US and Europe as consumers are giving up expensive and fancier restaurants.

However, US-style fast foods are not so cheap as the main stream restaurants especially in the smaller cities.

Lucy Wu, deputy secretary-general from China Chain Store & Franchise Association forecasted that the negative trend would worsen in the first half of 2009.

The economic slowdown lowered the rental for commercial premises, which spurred the new expansion plans of the fast-food chains, said Tian Huilan, researcher, First Capital Securities.

Cutting prices has created room for fast food chains to win more customers.

About one month ago, 1,400 KFC restaurants in 31 cities in China cut the prices of five of their popular set meals by at least 20%. The other restaurants are expected to follow suit soon.

KFC’s Zhao said they are preparing for the promotion programmes this year.

McDonald’s has launched a so-called “preferential programme” in Guangzhou, Shenzhen and Nanjing since last month. Prices of some items are reduced by as much as 28% during lunch hour under the programme.

The programme is planned to be extended to all McDonald’s restaurants in China next year.

Are you interested in the business opportunities in China?

BPOVIA is the leading virtual assistant and Knowledge process outsourcing (KPO ) service provider in China. BPOVIA is the only virtual assistant company ever been nominated for the prestigious “Red Herring 100 Asia” Awards 2008. Combines international perspective with local know-how, BPOVIA can provide our clients China business development service and help our clients doing successful business in China.

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