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As a part of a growing OEM manufacturing company here in China, it is a must for me to do research on business in China. I did not only research on current news and recent events but also dug deep to business headliners in China the last five years. Here is a collection of business headliners I can share to you. These headliners are not only limited to the supply and custom manufacturing industry but involve China commerce in general.
Qualcomm Settles with China, for now (Dec 2014)
The settlement of China’s anti-trust probe into Qualcomm Inc intensified global scrutiny of the firm’s highly profitable patent licensing business as China’s National Development and Reform Commission (NDRC) finished its 13-month investigation about the U.S. chipmaker.
The NDRC, one of China’s anti-trust regulator and inspection company, said it suspects Qualcomm of overcharging and abusing its market position in wireless communication standards. Qualcomm is expected by industry sources to agree to changes in how it charges royalties on cellphones sold in China based on the fact Qualcomm earned about half of its global revenue of $26.5 billion in China for the fiscal year ended Sept. 28.
Update: A very similar agreement was reached between Qualcomm and Apple in early 2019, unsurprising keeping these old new in mind.
China’s Stock Marketing Thriving (Dec 2014)
China was grappling with a slowing economy, falling property prices and increasingly tight financing conditions. However, the country’s stock markets were surging. Moreover, ordinary Chinese piled into the market at a pace unseen since 2007. Investors in Shanghai and Shenzhen opened nearly 900,000 new stock trading accounts in the week that ended Dec. 12 alone — the most in 7 years.
After several lackluster years, Shanghai’s benchmark stock index then ranked as the best-performing major index in the world, surpassing 3,100 points — the highest level in nearly 5 years. In addition, Brokerage firms in China, the largest of which are state-controlled, rode high on the rally as well. However, Anne Stevenson-Yang, a co-founder of J Capital Research in Beijing said, “There’s so much leverage in the market now that it’s really easy for it to become very volatile”.
China’s Rural Areas Outstrips Urban Areas for Retail Growth (Sept 2016)
China has a thriving e-commerce industry which makes it attractive for e-commerce business plans. Throughout 2015, the total amount spent by Chinese consumers over the internet was a staggering $589.61billion, a substantial increase of 33.3% from the previous year. This e-commerce revolution was fueled by the Chinese middle class, a demographic which is continually growing, with more Chinese citizens than ever seeing their disposable incomes rise.
However, recent news announced started to paint a different picture. Typically, urban areas seen a faster increase in disposable income levels for citizens. It may come as a surprise that for the second quarter of 2016, growth within rural areas increased at more enhanced rate than that of urban areas.
Data by the Ministry of Commerce showed that there was a 13.48% increase from the first quarter to the second for rural e-commerce sales. While growth in urban areas was still significant, it is estimated to be at least 4 percentage points lower than the 13.48% growth rate seen in urban China.
Overall, the split between urban and rural areas for total sales heavily weighted towards the more urban and populated areas. Only 14.14% of online sales within China came from rural areas. If the trend of rural areas outpacing urban areas continued, then we should expect this number to increase.
There was plenty of room for growth across the whole country when it comes to e-commerce. While 2015 saw $589.61billion in total sales, experts predict that from as early as 2018, the total value may top $1billion yearly. This meteoric rise was understandably directly linked with the rise in more Chinese citizens having access to the internet and more people looking to buy and sell products online. However, rising incomes as well as other factors also played a part.
Rural areas were identified to have huge potential in itself. In these areas, physical retail stores can be scarce, making this market extremely attractive to companies who wish to meet the needs of this market through providing e-commerce solutions. Chinese e-commerce giant Alibaba has already identified the untapped potential in this market and set up over 100,000 centres in these areas for rural residents to use to order from their websites. This meant even those residents who did not have access to the internet can still access the vast range of products found on sites such as Taobao.
According to a report produced by the China Internet Network Information Centre only 28.4% of total Chinese internet users were rural residents. In numerical terms, this equated to roughly 195 million users, of a total 688 million in total at the end of 2015. With the Chinese population totaling over 1.3 billion people, if China managed to mirror the percentage of connected users in countries like the United States, they would have an audience of over 1 billion users. This underlined the growth that is still to come, as well as the sheer size of the potential market not only with buyers but also those who have items to sell online.
As the country continued to catch up with many of the other major world economies globally, both rural and urban areas played a key part in growing the e-commerce market present in China.
China’s World Robot Conference is a Promising Look at the Future (Nov 2016)
An advanced exhibition happened in Beijing. At the show, leaders within the robot electronics manufacturing industry showcased the best technology that can be found during that time. The robot industry offered strong potential for growth. The industry was within an innovation stage and profits are low. Many companies were operating at a loss, yet with technological improvements, large profits were certainly made.
High costs associated with advanced robotics created a longer payback period. Factories over consumers saw a quicker return, as small increases in efficiencies resulted in large cost savings. Problems encountered by Chinese electronics manufacturers were solved by implementing advanced robotics. Factories continuously hit their capacity limits, an issue that was solved by increased automation. Chinese manufacturing companies welcomed the large-scale introduction of robots, which are almost certain to create larger profits.
What was seen at the World Robot Conference
The World Robot Conference in Beijing displayed glimpses into the future of a young industry which saw amazing innovation. Practical uses were seen in the form of robots sorting computer chips and sanding cell phone cases. It was easy to feel that in a short amount of time many manufacturing companies will custom build robots for specific purposes. One size would not fit all. Additionally, loading vehicles and packaging goods could be suitable areas for robot electronics manufacturers to explore. Domestic cleaning robots were also on display. Hotels and the service industry would greatly benefit from the mainstream introduction of such machines. If robot electronics manufacturers were able to implement professional uses within their manufacturing designs, they should see a quick adoption of the technology.
The government’s commitment to making robotics a focal point indicated the existence of an upcoming robot industry revolution. Set within the “Made in China 2025” plan, a national target of achieving 150 robots for every 10,000 employees were in place. Furthermore, the country outlined a goal of producing 100,000 industrial design robots annually. Anecdotal evidence included the view point of Steve Wyatt, acting head of ABB Robotics, who stated that its Chinese division has grown to more than 1600 employees.
Foxconn, the Chinese manufacturing company responsible for producing the iPhone, reportedly had 40,000 robots operating within its factories. Hence, the scope appeared huge.
The idea represented by a robotic workforce has received skepticism. If robots start to take the jobs of citizens, then potentially millions could be without work. On the other hand, a society with fewer menial jobs should help encourage a more skilled workforce. Mass scale implementation of robots comes with many drawbacks and positives. Whether or not it would be beneficial to the majority of workers will remain unknown until it happens.
Unskilled manufacturing jobs have left China. An increasingly costly labor force meant factories are starting to pop up in competing Asian counties. China was becoming a less attractive destination for electronics manufacturing investment. In contrast, a robotic workforce that enables the country to compete again with fine margins may actually save jobs. Furthermore, robots and autonomous machines will need regular servicing – a task performed by skilled employees who should be more beneficial to the economy.
Chinese robot producers still need to catch up with world industry leaders such as Japan. The innovation and product development on display is impressive and is an encouraging sign. With China sitting at 28th in the world in terms of robot density, the targets set by the Chinese government should see the country quickly rise. This commitment to embracing the robotic future continues to underline China’s desire to become a more specialized manufacturing country. If the country continues to strive towards such a goal, the need for higher skilled workers and better education will be greater than ever. If China wants to become the world’s biggest economy, or simply continue the strong growth it has seen in recent decades, this is an industry it needs to embrace. The World Robot Conference signals the beginning of a new era. The fact that Beijing is hosting the event ensures that the world can see China’s dedication to technology.
In conclusion, the potential is clear. Rather than a rapid implementation, the adoption will take time. Companies will invest only if it makes financial sense; therefore, until innovation combines with purpose, the future hasn’t arrived just yet. We live in exciting times, and the way prototype companies look today may be completely different from what they will look like in ten years.
Reading the news articles mentioned made me reflect on the current business issues in China. The optimism of China’s future then is only partially fulfilled and there is still a lot to work on for this great country to move on to the top of the world’s echelon. So far, everything has been great for businesses running in this country. However, let us be wary of the idea wherein commerce and economy can always be volatile. Let us only wish for the best.