June 2009 Archives

Grinding media (GM) is required for mineral processing operations using horizontal and vertical media mills. Different types of mills require customized grinding media with respect to chemical compatibility, size, viscosity, etc. Due to the complexities of this process, there is a certain amount of risk involved when it comes to sourcing grinding media from low cost countries like China, which is why the low cost sourcing of grinding media will only reach a peak in the coming years.

Chinese exports of grinding media have displayed remarkable growth in the last decade, with CAGR of 17.8% between 1998 and 2007. This is mainly due to the increasing international competitiveness of the Chinese grinding media industry, which is derived from a combination of low labour costs, increasing technological progress and rising quality standards. Consequently, China has become the world’s second-largest producer of GM with Japan and South Africa being the most significant export destinations of cast balls and forge balls, respectively. Other significant export destinations include Australia, Chile, Pakistan and Thailand.

Despite the potential cost savings in low cost sourcing from China, many users of grinding media are still hesitant due to inherent transactional risks and a lack of local and cultural knowledge. In order to overcome these obstacles, companies tend to hire procurement intermediaries, a process which inevitably leads to transactional opacity and the eroding of savings. Moreover, companies with no or little low cost sourcing experience tend to underestimate the importance of local knowledge and networks. Yet by undertaking a holistic and systematic approach with a partner who possesses adequate China knowledge, these mistakes can be avoided.

First of all, it is advisable to do in-depth market due diligence and to create a list of potential suppliers, and then whittle down the list according to relatively crude criteria such as location, infrastructure, and cohesive local supply chains. For the grinding media industry in China, the City of Ningguo in Anhui Province is a perfect example of a region which has a high level of agglomeration, specialization and easy access to well-trained labour and raw materials.

Having arrived at a manageable shortlist of suppliers, a detailed assessment of the shortlisted suppliers should provide a clear picture of the preferred supplier and its ability to meet the objectives of a company’s sourcing needs. Conducting business successfully in China is about building strong relationships, both with suppliers and in many instances with local government officials in order to gain a superior bargaining position for negotiations concerning price, payment terms, shipment terms and legal jurisdiction. This is where many foreign companies fail to utilize the full potential of low cost sourcing. A lack of the above-mentioned factors (local knowledge, weak relationship management, market due diligence) can easily lead to failure or dilution of savings over time, which in turn negatively impacts overall financial performance.

The 17th Shanghai International AD & Sign Technology and Equipment Exhibition

Venue:         Shanghai New International Expo Center
Date:            7 - 10 Jul 09
Organizer:    Shanghai Modern International Exhibition Co., Ltd.
Tel:              +86 21 6328 8899

Briefing:
The event will feature over 1,000 exhibitors with an exhibition space of around 100,000sqm. The fair will display the latest industry information as well as the most advanced products, such as AD & Sign Making Equipment & Materials, Printing Equipment & Consumables, Displaying, POP and Commercial Facilities, Landscape Illumination Equipment, etc.

More information.

EVENTS: Aluminium China 2009

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Aluminium China 2009

Venue:         Shanghai New International Expo Centre
Date:            30 Jun - 2 Jul 09
Organizer:    Reed Exhibitions (China) Ltd.
Tel:              +86 10 8518 9070

Briefing:
As part of the world renowned ALUMINIUM brand of leading events, Aluminium China 2009 will facilitate the development of China’s aluminium industry and promote fair exchange and competition within the industry. The event is intended as a platform for suppliers of aluminium raw material, semi-finished and finished products as well as producers of machinery, plants and equipment for aluminium processing and manufacturing to establish and maintain relationships with customers at home and abroad. Aluminium China 2009 will feature over 350 exhibitors within a space of over 23,000sqm.

More information.
China has just increased tax rebates for exporters for the seventh time since August 2008 as part of efforts to support exporters affected by the drop-off in overseas demand. Food companies, electronic and digital media product makers, as well as the ceramics and plastics industries will benefit from the new rebates, according to a statement by the Ministry of Finance. The new rebates are effective from June 1.

The China Sourcing Blog has translated the latest list of commodities, and the full list can be downloaded by clicking on this link:
 
ExportVATRebateAdjustment_16Jun09.pdf

Nearly half of the new items eligible for the tax rebate are food products, an industry not included in the previous six increases. Rebates on canned foods and fruit juices were increased to 15% from 13%. Some food products will get as much as an 8 percentage point increase. The inclusion of food items on the list is somewhat surprising, as demand in this industry is mostly inelastic and the industry itself is not directly affected by the financial crisis.

The rebate is on payments of the 17% value-added tax.

Rebates on products in labour-intensive light industries such as toys, shoes and hats, luggage and bags, and furniture have been raised to 15% from 13%. Toy exports fell 13% year-on-year in the four months to April, while bag and luggage exports fell 0.8% and shoe exports fell 0.6%, according to customs data.

Full export tax rebates, at 17%, are available for the hard-hit electronic products and digital media sectors, makers of products such as television transmitters, sewing machines, compact disks and CD-ROMs, generators, motors, and information processors. Export rebates on certain ceramic products have been lifted to 13%, while the alcohol rebate was pushed up to 5%.

The rebate on textiles and garments, which had already been raised to 16% in previous increases, was not included in the latest list.

(Source: Caijing.com.cn)

What Chinese Future for Hummer?

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Hummer China.jpgOn June 2, just a day after General Motors filed for Chapter 11 bankruptcy, it was announced that the US auto giant reached agreement on selling its Hummer brand to a little-known private Chinese company, Sichuan Tengzhong Heavy Industrial Machinery Co., Ltd, a manufacturer of road, construction and energy industry equipment in southwest China’s Sichuan province. So why would a company which mainly produces industrial machinery and has no experience in the passenger-vehicle market buy this famous off-road vehicle brand?

While the auto industry in the US and the rest of the world is suffering, the Chinese auto market alone keeps on expanding with unprecedented speed. Data released on June 9 by the China Passenger Car Association showed that sales of passenger vehicles, including minivans, sports utility vehicles, and multi-purpose vehicles reached 812,178 units in May, increasing by a faster-than expected 54.7% year-on-year, and up 1.2% from April. Total passenger car sales in the first five months jumped 29.6% to 3.64 million units from the same period last year. Many experts believe that China's automobile market is expected to see a new monthly sales record in June, and sales in the second half of the year is expected to be much better still than those in the first six months.

Given such assuring results and promising forecasts, its not surprising that companies without a direct relationship to manufacturing passenger cars should start showing stronger interest in this segment of the market. Yet what becomes more interesting now are the actual details of the deal.

It is not the first time that a Chinese company has bought a famous foreign auto brand. In 2004, Shanghai Automotive Industry Corporation Group (SAIC) purchased a 48.9% equity share of Ssangyong Motor, the fourth-largest automaker in the Republic of Korea. In 2005, Nanjing Automotive bought the British brand MG. And this March, China's largest independent carmaker Geely Automobile acquired Drivetrain Systems International, the world's second-largest auto transmission supplier.

For its part, Tengzhong have officially announced that it has no plans to manufacture Hummer in a Chinese plant. Rather than setting up a plant in China, Tengzhong plans to keep using the current facilities in the US. Moreover, the deal will also allow Tengzhong to keep Hummer's original management and operational team intact, along with the Hummer brand. As Yang Yi, Tengzhong CEO, put it in a statement, “the company will allow Hummer to innovate under the leadership and continuity of its current management team.”

Considering this information, it is clear that Tengzhong is investing not in new manufacturing capacity, but in Hummer’s research and development capabilities. This serves as another good illustration of how Chinese companies are willing to pursue opportunities to learn from foreign brands’ successful experience in research, design, marketing and service.

Tengzhong’s plans, however, may still face resistance from the Chinese government. Officials from the Development Research Center of the State Council have already made it clear that they are not enthusiastic about the deal, to say the least. They have claimed that “buying a fuel-hungry and high-emission brand is directly against the current trend of energy saving and emission reduction.” So there is still a possibility that the deal can be blocked. So both sides, General Motors and Tengzhong, are waiting in anticipation of the government’s decision on the matter.
CHINA-FOOD-SAFETY.jpgThe long-awaited new Food Safety Law, which was approved by the Standing Committee of the Eleventh National People's Congress, went into effect on June 1, 2009. After a series of food scandals in China, the new law will undoubtedly not be able to allay domestic food product problems in one fell swoop.

The new law does show, however, that the government is intent on taking extreme measures against companies producing contaminated foods. Last year, with the Sanlu scandal, at least six babies died and 300,000 others fell ill because of poisonous milk powder. It was the most serious tainted food incident in China in recent years.

In the last few decades, China has implemented at least 20 food safety laws and 190 relevant regulations, and assigned 35 commissions to supervise the food industry. Yet even with so many regulations and laws, China still lacks effective supervision and enforcement. Confusion often occurs during implementation of the regulations, with sometimes strict and sometimes loose enforcement utilized by the regulatory authorities.

According to Professor Zheng from the Department of Agricultural Economy at China Renmin University, although the new law adds more punishments for offenders, it does not specify how to follow up on the tainted foods produced by more than 500,000 food-processing plants. Routine and sample inspections are almost useless because many people from different industries are involved in food processing operations, and many additives are purposefully added into the foods by illegal producers. Prof Zheng thought that the government should be focusing on resolving the remaining legal loopholes.

It has been reported in the media that 60% of people on the mainland do not believe that the new Food Safety Law will represent a substantial improvement on food safety. Nevertheless, the government has committed itself to implement a food recall system and has increased fines for infringements by up to ten times the original value of the contaminated products. It has also set up a new assessment center which will focus on identifying food safety problems at an early stage. Yet despite the stringent new law, many netizens in China doubt whether the new regulations will be completely successful, as a lot of the food safety problems are more directly associated with the failure of effective control and supervision on the part of health regulatory authorities.

While the new law is certainly a step forward, the process of helping the public establish complete confidence in the domestic food industry will not be a short process, and there's still some distance to cover.

(Image: www.upi.com)

The China International Consumer Electronics Show (Qingdao)

Venue:         Qingdao International Convention Center, Qingdao
Date:            09 - 12 Jul 09
Organizer:    China International Consumer Electronics Show organizing committee
Tel:              +86 532 8197 8683

Briefing:
As the largest exhibition for consumer electronics technology in China, SINOCES is regarded as a gateway into one of the world's biggest markets. The event will display the latest industry information as well as the most advanced products with a green technology zone, an industrial design zone, a 3G telecommunications zone, and an E-commerce Zone Home. SINOCES is intended to offer opportunities for leading consumer electronics business players from China and abroad to build relationships with customers.

More information.
To get some perspective on where we currently stand with the global economic crisis, we’ve put together the following snapshot of the current economic situation in a few selected countries.

为更好地了解目全球经济危机发展到目前阶段给各国的影响,我们收集了以下的一些国家关于目前经济情况的新闻。

South Africa 南非
South Africa’s manufacturing output declined by a record 21.6% year-on-year in April, with the country recording its lowest manufacturing output since January 2004. Statistics South Africa (Stats SA) reported that the basic iron and steel, nonferrous metal products, metal products and machinery division had declined by 26.4% year-on-year in April. The motor vehicles, parts and accessories and other transport equipment industry registered a 49% decline year-on-year. The petroleum, chemical products, rubber and plastic products division declined by 15.2% year-on-year.

2009年4月,南非的制造业产值与上年同期相比创纪录的下降了21.6%,这也是该国自2004年1月起最低的制造业产值。南非统计局的报告显示钢铁,有色金属产品,金属制品和机械制造业同期下降了26.4%,有助于6.1 %的下降。汽车及零部件和其他交通设备行业产值同比下降了49%。石油,化学品,橡胶和塑料产品工业同比下降了15.2%。
Source: Engineering News

CIS 独联体国家
During January-April industrial output increased only in Azerbaijan among the CIS states, according to data provided by the CIS Interstate Statistics Committee. A decline in industrial output was registered in the other CIS states. The decline is lowest in Belarus — 3.6%. Belarus is followed by Kazakhstan (4.8%), Armenia (11.1%), and Tajikistan (11.9%). Among the CIS the industrial output decline is largest in the Ukraine (31.9%), Moldova (25.7%), Kyrgyzstan (15.6%), and Russia (14.9%). In January-April the average industrial output decline across the CIS states totalled 16% in comparison with the same period of last year. The statistics committee has no data regarding the industrial output of Georgia, which is pulling out of the CIS, and no data either from Uzbekistan and Turkmenistan.

根据独联体国家间统计委员会提供的数据,2009年1月至4月独联体国家中只有阿塞拜疆的工业产值有所上升。 其他的独联体国家工业产值都有下降。下降比较轻微的是白俄罗斯- 3.6%。其次是哈萨克斯坦(4.8%),亚美尼亚(11.1%)和塔吉克斯坦(11.9%) 。下降最严重的是乌克兰(31.9 %),摩尔多瓦(25.7%),吉尔吉斯斯坦(15.6%),俄罗斯(14.9 %)。 1月至4月独联体国家平均工业产值同比下降16%。以上数据统计不包括格鲁吉亚,乌兹别克斯坦和土库曼斯坦。
Source: BelTA

Australia 澳大利亚
Australian Industry Group-PricewaterhouseCoopers Australian PMI® fell by 3.1 points to a historically low 30.1 in April. The seasonally-adjusted new orders sub index fell 3.8 points to 26.7. Exports fell for the eighth consecutive month, manufacturing activity fell in all states. The largest falls were recorded in Western Australia and South Australia.

澳大利亚工业集团和普华永道联合公布的2009年4月制造业表现指数下跌3.1点至30.1,是迄今为止的最低值。新订单指数下降3.8点至26.7 。出口连续第八个月下降。制造业活动指数在澳大利亚各个地区都有所下降。下滑最严重的地区是西澳和南澳。
Source: Australian Industry Group

Brazil 巴西
Industrial production in Brazil rose 1.1% in April from March, the government's statistics agency IBGE said. When compared with April 2008, industrial production plunged 14.8%.

根据巴西政府统计机构IBGE的数据,2009年4月巴西工业总产值比3月增长了1.1%,与上年同期相比下降了14.8%。
Source: Reuters

The 10th China (Guangzhou) International Metal & Metallurgy Exhibition

Venue:         China Import and Export Fair Pazhou Complex, Guangzhou
Dates:          23 - 26 Jun 09
Organizer:    Julang Exhibition Co.,Ltd, Guangdong Provincial Metal Society
Tel:             +86 20 3862 1295

Briefing:
As the largest metal industry expo in Asia, this event will exhibit a wide variety of products ranging from raw materials to machinery technology equipment. The exhibition is intended as a cooperative platform for enterprises at home and abroad to establish and maintain relations with customers.

More information.

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