May 2010 Archives

Given the worldwide importance of environmental protection and the continued drive for a shift away from fossil fuels, the market for electric vehicles is becoming one of the leading emerging markets for China and the world. With the electric vehicle industry rapidly gaining importance, and with HSBC anticipating China’s share of the global market to rise from 2.7% in 2010 to 35% by 2020, global players within the industry are already working to position themselves in China through new products and innovations.

With a large and growing domestic market and emerging opportunities abroad, China could become a leader in this relatively new and untested electric vehicle segment of the transportation industry. Evolving market conditions have created an opportunity for China to establish itself as a predominant force, as for the first time it is entering a relatively immature industry in a state comparable with the global competition. Several factors suggest that China may yet become a leader and predominant player in the electric vehicle industry.

China’s strong domestic market provides one advantage for China in that it will provide a solid footing for local manufacturers to progress domestically before entering overseas markets. Research by Ernst & Young's Global Automotive Center has stated that as much as 60% of Chinese consumers would consider purchasing an electric car. This high percentage, in addition to China’s already expanding automotive market, suggests that domestic electric vehicle producers will have ample opportunity to improve and expand their processes to satisfy local demand. However, the relatively high cost of electric vehicles has garnered some attention as potentially hampering growth of this industry within China.

These concerns may be overcome with the help of government support for the expansion of China’s electric vehicle industry. The government is currently providing subsidies of up to RMB 60,000 (or USD 8,789) for consumers to purchase an electric vehicle, and strong government support for China’s electric vehicle industry may yet act as a springboard to drive sales, increase production, and in time, reduce manufacturing costs. In this the Chinese government is not alone in the promotion of electric automobiles. At least 12 other nations are also investing directly into the development of alternative energy sources through programmes similar to China’s ‘Revitalisation and Readjustment Programme for the Automotive Industry’. China’s programme is one of the largest of its kind, however, with a subsidy of RMB 10 billion (USD 1.5 billion) earmarked for alternative energy, to be distributed over a three year time period, for research and development.

The availability of infrastructure to support the development of electric vehicles is another major advantage held by China. The government has plans to expand the electrical capabilities of public transit networks via the addition of more battery powered buses and charging stations. The development of individual charging stations also seems to be underway as, for example, a 100-vehicle electric taxi fleet made up of Chinese electric car maker BYD’s E6 model was recently launched in the city of Shenzhen as part of the green city initiative. According to China Daily the city plans to have 12,750 charging stations by 2012 to support the growing number of electric vehicles.

The global market by comparison seems less prepared to embrace the electric vehicle. The interest shown by 60% of China’s consumers is almost five times higher than that in countries such as the US, Germany and Japan. These foreign markets may become more receptive to alternative energy technologies with time, providing China with a competitive advantage from having developed production techniques domestically before expanding abroad. The vast size of the Chinese market will likely aid in bringing down production costs, as China will be able to leverage its traditional low-cost manufacturing along with innovative technologies in the global market to indeed become a leader in this industry.
coal.jpg2010 China (Shanxi) Coal Mining Equipment and New Energy Industrial Expo

Venue: Datong Coal Technology College Exhibition Center, Shanxi
Date: 17-19 May 2010
Organiser: Taiyuan Aides Exhibition and Planning Co., Ltd
Tel: +86 0351 786 9527

As one of the leading international expositions for coal mining equipment and alternative energy sources, this expo gathers major players in these industries to advance international communication and cooperation. A platform is provided for domestic and international enterprises to establish, maintain and strengthen their strategic partnerships. The exhibition fully showcases the energy sector’s latest technology, equipment and protective devices as well as displays the most recent professional coal mining equipment for underground transportation, coal washing and screening. Head west to Shanxi to catch this three-day exhibition.

More information.

The dry spell that began in the fall of 2009 is hurting China's industrial sector despite its location in the primarily agricultural provinces of the southwest.

China needs to experience at least ten instances of medium to heavy rainfall to ease the current aridity of Chongqing, and the provinces of Yunnan, Guizhou, Guangxi and Sichuan. Otherwise, productivity in the export manufacturing industries and, consequently, delivery lead times will be significantly impacted.

Although production in the southwestern provinces centres on agriculture, some industrial sectors have a presence there. Yunnan, for instance, is one of the country's major manufacturers of rubber. Last year, the province turned out 302,000 tons of raw rubber, contributing nearly 39% of the nation’s annual yield. The months-long drought, however, is curtailing volume, which is projected to decrease 10 to 20% percent if the situation does not improve before June.

China already imports much of its rubber from Indonesia, Malaysia, Thailand and Vietnam. But the drought affecting the country's southwest is felt by all areas along the Mekong River, which includes Thailand and Vietnam. Demand for rubber continues to grow alongside China’s heightened tyre production. As a result, the cost of natural rubber increased to 25,000 yuan ($3,660) per ton in April, up 12% from just two months prior.

Publicly listed tyre maker Aeolus reports that rubber in the domestic and international spot markets is now 10 to 14% more expensive than it was in October 2009. Among local processors, Kunming Yun Ken Rubber Co. Ltd, which is currently turning out two-thirds less than its average yield, offers natural rubber at more than 24,000 yuan ($3,510) per ton.

There is some concern that rubber costs might soar to record highs in H2 2010 if the drought does not ease in May.

No rain, no power

The resulting shortage in electricity is one of the reasons why the drought has severely hampered rubber production. Hydropower is one of the most important sources of energy in the southwestern provinces, contributing 45 to 50% of the region’s total energy supply. The extended dry season, however, has made it difficult for hydropower stations to generate at full capacity. As such, the region is now experiencing a 25 to 30% shortfall in its required electrical output.

Apart from rubber, nonferrous metals such as copper, aluminium, zinc and tin are widely processed in Yunnan. Although the energy deficit has slowed smelting and refining, productivity in this sector has not been as severely affected.

Although copper is a major input for the manufacturing of consumer electronics, Yunnan accounts for only 9% of national output. Priority has been given to large nonferrous metal suppliers in the process of power rationing, to include producers of copper, allowing those in the nonferrous industry to yield a 64% m-o-m growth in output during March. Moreover, many of these large producers have standalone power stations.

Aluminium is a key metal as well, particularly as an input for the production of kitchenware, hardware, and in the housing for some electronics products. The drought and the resulting energy shortfall is affecting manufacturers’ ability to perform electrolysis—the energy intensive technique used to produce aluminium—thereby causing those in the industry to reduce their projections of output by 20% for the year. However, this may not be a detrimental development for China’s aluminium industry, currently experiencing an oversupply of the metal.

The effects of the power deficit have reached even the coastal provinces. Guangdong, for instance, used to acquire 30 percent of its electricity from the southwest. Now, the province supplies a portion of its power load to the interior.

The Guangdong Economic and Information Technology Commission puts the current shortfall at 3.35 million kW per day. This situation has led to a peak-shifting strategy, where high-electricity consuming industries have to carry out their operations at night. In major cities such as Guangzhou and Shenzhen, industrial parks and high-tech enterprises are guaranteed sufficient power.

However, if the drought extends through June, Guangdong’s production will inevitably be affected. Businesses that are already reeling from the effects of a labor shortage will have to contend with power outages as well, which will inevitably result in missed deadlines and delayed deliveries.

This article was originally published by Global Sources, a leading business-to-business media company and a primary facilitator of trade with China manufacturers and India suppliers, providing essential sourcing information to volume buyers through e-magazines, trade shows and industry research.

Is Baidu Unstoppable Now?

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baidu9.jpgWith Google gone, is Baidu set to completely dominate the Chinese search engine market or are there other challengers waiting in the wings? Before its high-profile withdrawal from the Chinese market in March, Google was competing for control over the highly lucrative Chinese search engine market – growing fast and forecast to be worth $4.9 billion in advertising revenue by 2015 – with its Chinese competitor Baidu. Now, with the dust of Google’s exit to Hong Kong settled, Baidu indeed seems destined for a monopoly. Yet the future of this vast market hinges on other competitors’ readiness to fill Google’s void and challenge Baidu’s position as the clear market leader.

In spite of Baidu’s dominant position, the Chinese search engine market is host to several smaller competitors. The main ones are the Chinese division of Microsoft’s Bing; a Beijing based search engine named SoGou, owned by the large Chinese internet entity SoHu; former Google partner, owned by Tencent Inc.; and the Chinese division of Yahoo which owns 44% of the Chinese business-to-business site These potential challengers are all much smaller than Baidu, each holding less than 1% market share prior to Google’s withdrawal.

Nevertheless these companies are displaying some advantages which may yet enhance their ability to take on Baidu. Many of the competitors are, like Baidu, domestic firms with a better grasp on the Chinese market. Craig Mundie, Microsoft’s Chief Research and Strategy Officer, recently stated that Microsoft’s ability, as a Western firm, to maintain a longer presence in China indicates Bing’s potential to succeed. For its part, SoGou is supported by an active community centered on its parent

Still, Q1 2010 data published by Analysys International suggests that Baidu profited the most from Google’s China exit. Baidu managed to extend its market share from 58.4% at the end of last year to an impressive 64% by the end of Q1 2010. While Baidu’s growth is not surprising, the fact that it extends beyond Google’s market share loss of 4.7% is. Instead of only acquiring some of the market share previously held by Google, other competitors have conceded a further 0.9% to Baidu, a significant chunk of their already puny holdings. Additionally, recent declarations of a 165% increase in Q1 net income and the implementation—to come on 12 May 2010—of a 10-for-1 split for its American depositary shares are indicative of Baidu’s momentum. Baidu’s competitors in China, it seems, simply lack the size and the ability to step up and fill the void left by Google’s exit. The current state of the industry thus seems to suggest that Baidu will reign undisturbed for now, drawing the majority of advertising revenue until its competitors manage to find a niche of their own in the Chinese market.

There are signs that something is stirring among Baidu’s remaining competitors, however. Recent rumors of a possible partnership between large Chinese internet company NetEase and MSN could, through NetEase’s vast user base and expert market knowledge, just give Bing a necessary boost to threaten Baidu’s entrenched position. Yet it remains a question of when – as well as if.
TCA MAY Cover.jpgIts that time of the year again: after months of hard thinking and hard working and a few weeks of slightly too many cups of coffee, we can now share the latest edition of our handiwork, The China Analyst May edition. For this edition we have looked at China from a new perspective: Technology.

In the leading features we trace China's industrial heritage and progression in science and technology and look at its most innovative firms. We also consider the rise of China's engineering and design firms rapidly gaining global market share as well as China's new-found prowess in mining processing technology.

The rest of the magazine contains some interesting additions. In China Sourcing Strategy, for example, we have an extended map of China's leading industrial clusters, and in the Strategy section we have an in-depth analysis of China's role in the global gold mining industry, along with an investigation of China's largest and most successful gold mining firm: Zijin Mining Group. In addition, the China-Latin America Regional Focus section contains an interview with Tatiana Rosito, the Brazilian Trade and Economic Counsellor in Beijing, on the state of the Brazil-China bilateral relationship.

These are only some of the things you will find in the new edition, so without further ado, here it is (1.9 MB):
The China Analyst - May 2010.pdf

If you have any thoughts, we'd love to hear from you.

6th China Pipe Fittings Expo

Venue: Shanghai International Exhibition Centre 
Date: 11-13 May 2010
Organiser: Shanghai Shenshi Exhibition Service Co., Ltd.
Tel: +86-21-52830917

As one of the leading and most specialised international pipe fittings exhibitions in the Asia-Pacific region, this expo is intended to provide a platform for enterprises at home and abroad to build, develop and maintain relationships. The expo will showcase the latest industrial information as well as three main types of products namely pipes, flanges and pipe equipment. This expo is also intended to serve as a cross-border business bridge that can help both suppliers and users to acquire international market information, observe industrial trends and build distribution channels.

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